May Encourage Deception: Employees may look for ways to make their performance appear to be good when it isn’t.
Misaligned Incentives: poorly conceived ones may incentivize risky and irresponsible behavior that undermines the mission of the company.
Can Lead to Conflict: iI competitive workplaces with limited rewards, employees may engage in bad behavior to get ahead or become convinced that pursuing incentives is a zero-sum proposition and become resentful.
Incentive plans are formalized approaches to offering recognition and reward to employees for meeting pre-established goals or objectives. Incentives may include cash bonuses, profit sharing, additional paid vacation time or any range of prizes such as gift cards, corporate merchandise or other products or services. ...
The Peter Principle is the observation that if people are good at doing their jobs they will be promoted. It follows that eventually, everyone will be doing a job that they are not good at (otherwise they would have been promoted).
A study looked at promotions and performance of some 40,000 sales workers across 131 firms.
It showed that the best salespeople as measured by sales revenue are more likely to be promoted (top figure) but their value added as managers actually declines in their sales revenues (bottom figure).
Charlie Munger According to Charlie Munger, there are only a few forces more powerful than incentives. In his speech " The Psychology of Human Misjudgment," he reflects on how the power of incentives never disappoints him: Well, I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it.
Studies on reinforcement revealed that the best way for us to learn complex behaviors is via continuous reinforcement, in which the desired behavior is rewarded every time it’s performed. Consistency and timing are the keys.
Nonetheless, some argue that intermittent reinforcement is the most efficient way to maintain an already learnt behavior. It consists of giving reinforcement only some of the times that the desired behavior occurs.