Why external rewards undermine internal motivation

In my last post, I mentioned the issue of lack of trust in institutions. It appears that our world is increasingly running on financial incentives and regulation. Psychologist Barry Schwartz states that this undermines our will to do the right thing.

This week Dr Todd Cameron, GP and practice owner in Victoria, posted an excellent four-minute LinkedIn video about why financial incentives are not as effective as we sometimes think. He mentioned the following issues with financial performance systems:

  • They assume people are lazy
  • They are not supported by scientific evidence
  • They ignore activities that are difficult to measure
  • They reduce the flexibility of organisations
  • They take away resources for system improvement
  • KPIs often work against each other or against other goals, values or purposes
  • KPIs can undermine collaboration.

Research confirms that incentives, big or small, usually backfire. Like punishments, they affect internal motivation and creativity. Social scientist and author Alfie Kohn wrote about the ‘bonus effect’ in Psychology Today:

“When people are promised a monetary reward for doing a task well, the primary outcome is that they get more excited about money. This happens even when they don’t meet the standard for getting paid.”

Kohn states that rewards not only make people lose interest in whatever they had to do to get the reward but incentive systems also reduce the quality of their performance.

I believe Todd is right, money should be the byproduct of doing a great job. Pay is clearly not a motivator to improve performance. Most people get out of bed in the morning because they want to do the right thing – this is usually something we’re good at or passionate about.

Great examples and a work environment that gives people freedom and sets a clear direction at the same time are more powerful than monetary bonuses. Todd recommends that KPI funds should be used to improve systems and collaborative platforms and that targets should not be tied to financial rewards.

What happened to common sense

Last week, at the final meeting of the My Health Record Expansion Program steering Group, we spoke about trust. Or better, the lack of trust people have in big databases, governments in general and many other institutions.

This global trend is described by psychologist professor Barry Schwartz, who says:

“(…) the disenchantment we experience as recipients of services is often matched by the dissatisfaction of those who provide them. Most doctors want to practice medicine as it should be practised. But they feel helpless faced with the challenge of balancing the needs and desires of patients with the practical demands of hassling with insurance companies, earning enough to pay malpractice premiums, and squeezing patients into seven-minute visits – all the while keeping up with the latest developments in their fields.

Schwartz says that we seem to respond to any problem with the same answer of sticks and carrots. There is a widespread belief that more and better rules and incentives will solve our woes. There is one issue. Rules and incentives deprive us of the opportunity to do the right thing. They undermine empathy, creativity and the will to figure out what moral right means.

The My Health record offers great opportunities for healthcare in Australia. However, even though 90.1% of Australians now have access to the My Health Record, this cannot be the end of the line. A system that is responsive, has means to listen to users and learn from errors, mistakes and imperfections, is key to an effective and trustworthy digital health solution into the future.

Kindness, care and empathy are an essential part of my job – and everyone else’s. But it’s unlikely that this will ever be translated into key performance indicators or expressed in My Health Record upload percentages, practice incentive payments or MBS fees.

People are inspired by great examples, not by incentives. Above all, most people want to do the right thing. Trust may be a rare commodity these days but it remains an essential ingredient of effective healthcare delivery. It’s common sense, really.