Lessons from a scandal: Should bonuses be paid for ‘just doing the right thing’?

If you live in the UK then, like me, you have probably been engrossed in the scandal at the Post Office that has dominated headlines for some time. If you’re not in the UK, then a quick recap. The Post Office was a beloved institution in the UK, but faulty software led to over 900 people, who ran individual post offices across the country being wrongly convicted of theft – many serving prison sentences and some taking their own life. The scandal, media coverage and ultimately court hearings that ensued has led to those convictions being overturned and a settlement of £58 million being awarded to the wrongly accused sub postmasters. It also led to a public inquiry.

I’ve followed the story avidly – shocked and incredulous at both the personal tragedies and the evidence of corporate wrongdoing. But it was a comment by the new CEO of the Post Office, Nick Read that prompted this week’s 5 Minute Monday. In an interview with the BBC on their excellent podcast The Great Post Office Trial, Mr Read was attempting to defend the fact that bonuses had been paid to Post Office executives to incentivise them to help with the public inquiry. He wanted his managers to be helpful to the inquiry, he explained, to be transparent and to provide the necessary documentation, but that also he needed them to go above and beyond and that the best way to that, and I quote ‘is to incentivise them to do it’. I’m sorry?! The organisation that he leads has been responsible for what is being called the biggest miscarriage of justice in UK history – and he believes he needs to incentivise senior managers to help put things right?!!!

For me, this comment exposes yet again the problem with one of the strongest of the deeply held beliefs in corporate life – that unless you dangle a financial carrot, your people won’t be motivated.

Research tells us that bonuses don’t work

Interestingly, research suggests that, by and large, bonuses are strikingly ineffective. Studies show that offering incentives for losing weight, quitting smoking or using seat belts, for example, is not only less effective than other strategies but often proves worse than doing nothing at all. Incentives do not alter the attitudes that underlie our behaviours. They do not create an enduring commitment to any action. At least two dozen studies over the last three decades have conclusively shown that people who expect to receive a reward simply do not perform as well as those who expect no reward at all.

Dangling a financial carrot can lead to a temporary uplift, but it won’t last – and worse, by introducing external, financial incentives, you actually destroy the motivation that was there without it.

Not everyone wants money – and if we do, then not everyone wants it for the same reason

Our bonus systems are based on the myth that money is what everybody wants and that if we get it, we will have happier and more engaged employees. Indeed, several studies over the last few decades have found that when people are asked to guess what matters to their co-workers, or, in the case of managers, to their teams, they assume money heads the list. But put the question directly; “What do you care about?” and money typically ranks only fifth or sixth.

Giving money is easier

So, why do we continue to believe that our people are only interested in more money? Maybe, in part, it’s because money can represent many different things that many of us do want, such as power, freedom, security, appreciation, etc. Giving money is an easy ‘catch-all’ and much simpler than trying to really get to what each of the individuals in our team really value. Managers often use incentives as a substitute for giving workers what they need to do a good job. Treating workers well—providing useful feedback, giving them the right mix of support and autonomy – are great management practices. On the other hand, dangling a bonus in front of requires much less effort.

But for me the argument that bonuses will keep people focused on doing the right thing is the most flawed. Research tells us that bonuses can:

• discourage risk-taking
• destroy collaboration
• and can destroy ethics

These beliefs about the effectiveness of bonuses endure because we have held them for so long and because we’ve built our performance and reward structures around them. And yet the evidence is there, and has been for years, to show that these bonus myths should be challenged. Incentivising people to do the right thing isn’t necessary. What IS essential is having people in your organisation who know what the right thing is and who want to do it BECAUSE it’s the right thing – without the need for additional money.