Big bonuses produce better performance, right?

Bigger bonus = smaller results. Huh?

Wrong. This is no left-wing spin – the research was funded by the Federal Reserve Bank.

When you pay people who have to think, the bigger the bonus you pay them, the smaller the results your get. Bigger bonuses only drive more results when you pay for work done by your people’s hands and arms, legs and feet.

So why are we laughing?

Don’t believe me? In fact, do you feel rather angry? Rant away. But if Vegas ran a book where you bet on the results of these experiments, and you put your money on the players offered the big bonus, the house wins. Come to think of it, the house does win in Vegas.

For a 10-minute visual picture of the perverse power of bonuses, check out Dan Pink’s talk Drive: the surprising truth about what motivates us. The infographic at top right is from Pink’s talk.

For detail, check out Dan Ariely’s The Upside of Irrationality. It’s fascinating.


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