Susanna Gallani

These findings echo one of the main concerns associated with monetary rewards that sometimes fail to accomplish their goals. Academics refer to this phenomenon as the crowding-out effect of explicit incentives on intrinsic motivation. In other words, associating an economic value with a certain activity changes the nature of the exchange. If health care workers sanitize their hands because it is in the best interest of the patient (and themselves), introducing monetary rewards may change their motivation to a contractual exchange of hand sanitizing for money.

The consequences of this modification are twofold. First, the economic value communicated by the bonus amount might be lower than what that activity was worth in the person’s mind, thus making it not worth the effort or lowering its priority when multiple activities compete for the person’s time. Second, the change in the nature of the exchange creates a contractual expectation, by which the absence of further payments would justify withholding the behavior. Whether monetary incentives can disincentivize desired behaviors altogether or simply reduce the likelihood that the activity persists beyond the bonus payment, managers must take these risks into consideration when they introduce an improvement initiative.

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