The Money Screws You Up

Thinking out of the box is harder with a monetary reward:

 How could this be? The financial incentive made people slower? It gets worse -- the slowness increases with the incentive. The higher the monetary reward, the worse the performance! This result has been repeated many times since the original experiment.

Glucksberg and others have shown this result to be highly robust. Daniel Pink calls it a legally provable "fact." How should we interpret the above results?

When your employees have to do something straightforward, like pressing a button or manning one stage in an assembly line, financial incentives work. It's a small effect, but they do work. Simple jobs are like the simple candle problem.

However, if your people must do something that requires any creative or critical thinking, financial incentives hurt. The In-Box Candle Problem is the stereotypical problem that requires you to think "Out of the Box," (you knew that was coming, didn't you?). Whenever people must think out of the box, offering them a monetary carrot will keep them in that box.

A monetary reward will help your employees focus. That's the point. When you're focused you are less able to think laterally. You become dumber. This is not the kind of thing we want if we expect to solve the problems that face us in the 21st century.