Merit and Bonus Pay Incentives – Fundamental Problems Show in Research

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Dear Readers!

Earlier today I heard a 45-minute broadcast on BBC’s Forum program. Dan Ariely was a featured expert on questions of merit pay. BBC asks and hints: “Are big bonuses simply there for bankers to boost their image and line their pockets, rather than actually improve performance? … Israeli behavioural economist Dan Ariely has surprising insights into the behaviour of big earners. ” The portion of the program featuring Ariely is the first portion, possibly 15-20 minutes. Near the end, he comments on merit pay for teachers.

I highly recommend a listen to the BBC interview – to anyone interested in merit pay – as it applies to financiers, teachers, or others. Ariely’s remarks certainly support my own views, which I’ve written here: “Merit Pay Problem”.

As a result of the BBC Forum broadcast, I’ve spent the day rounding up additional research on problems and/or value of merit pay. I have found strong evidence that my opinions, at “Merit Pay Problem” are on track with research. I’ve created a new page, giving links and brief notes with each: “Merit Pay Research Links”, ‘Essential Practice‘ section, at right-hand column, this site.

Dan Ariely is “the James B. Duke Professor of Psychology & Behavioral Economics at Duke University, where he holds appointments at the Fuqua School of Business, the Center for Cognitive Neuroscience, the School of Medicine, and the department of Economics…” (excerpt from ‘brief bio’ page’ at his website found here.)

He is author of  Predictably Irrational, (published 2008). It is our irrationality that interferes with our otherwise ‘common sense’ assumption that merit pay (carrot-stick incentive) should promote ‘best performance’.  (It doesn’t, not in any lasting way.)

The YouTube presentation I offer with this post is a talk he gave to a Google audience soon after Predictably Irrational was published. I have heard this presentation several times, and find it valuable in our human self-understanding. It is certainly relevant to issues of merit pay!

Ariely has conducted many experiments with human subjects in decision making. He has investigated “what’s going on” with our motivations – motivations to perform, to choose A or B, to cheat or not. The experiments and results make entertaining stories as well as revealing ‘who we are’. He’s interested, amused – and his talks are interesting and fun! I’m pleased to recommend this video! (Dan Ariely is also available in briefer posts at YouTube. See also his website, linked above.) 

Please note, the 50 min video lecture is wonderful, but it is not solely focused on merit pay. Rather, in it, Ariely reviews questions, experiments, and findings that cast light on what motivates us, and the ‘why’ of our choices. These findings, in turn, are important to understanding why merit/bonus incentives do not work.  The video is especially relevant to  the merit/bonus issue when other research,  specific to merit/bonus pay, is considered.   See “Merit Pay Research Links” for more Ariely links, and for links to other experts who’ve studied merit/bonus pay.

Enjoy! –MaggieAnn

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About maggieannthoeni

A description once given of me was "rooted in the earth while roaming the stars" - and this has felt 'right'. I believe in something akin to this for each of us. I am a passionate supporter of discovering the autonomous self while serving the whole as primary intent. I believe in discovery of innate principles, clearing the overlay of socialization that obscures this from us. I believe it is our responsibility to leave no one behind - most particularly to respond to suffering as best we can whereever we find it, whenever we are made aware. I believe in this for the insect as well as the most magnificent form of humanity. I believe in brother/sisterhood without boundary. I believe in righteous indignation when it is appropriate, but do not believe in an enemy. I believe in consciousness, in intelligence, in logic, in rationality, in emotion, in transcendence - and am convinced until we generally practice explore and honor all this in ourselves, we remain profoundly immature. (I believe real maturity is known and practiced by many young children, and not enough adults!)
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