A study indicates that many companies are not only causing unnecessary stress to their employees, but also wasting money on ineffective bonus schemes.
It remains a fact that monetary incentives and social pressure motivate people to work harder, but a recent research has revealed that there is no improvement in the performance of the employees due to these factors, especially in case of jobs that require vigilance and attention.
According to a new neuroscience research sponsored by CIMA (Chartered Institute of Management Accountants), it is difficult to enhance performance beyond the inherent limits of the human brain.
As part of this research process, participants were made to perform a series of computer-based tasks, and researchers measured and analysed their brain activity for their ability to assess information under different time pressures and types of distractions.
The researchers distinguished between situations in which managers received a monetary reward for speed and accuracy, and a different scenario where managers experienced social pressure to perform well.
Acccording to Frank Hartmann, professor of management accounting and management control, Rotterdam School of Management, Erasmus University, who was part of the research team, ‘If basic biology limits one’s ability to improve at certain types of work, one needs to think more imaginatively about the way one measures and rewards work performance. It may be much more task-specific than one is currently inclined to think.”
The research suggests that businesses need to recognise the performance limits of individual employees and avoid frustrating situations when results do not reflect best efforts.
Organisations should also take care that performance assessments accurately capture the efforts of workers, both to measure whether targets and incentives are effective and to ensure that individuals are rewarded fairly.
The study indicates that many companies are not only causing unnecessary stress to their employees, but also wasting money on ineffective bonus schemes. These companies need to consider alternative incentives for areas of work, which depend on vigilance and attention, such as governance or quality control.
‘There is a wider point too. Modern companies have a large set of incentives available to them. Yet, many keep reaching for two in particular: exerting pressure from above, or incentivising through bonuses. While in many cases these tactics work, this research indicates that sometimes these are simply the wrong tools for the job,” says Ian Selby, director of research and development, CIMA.
“This is the equivalent of a builder trying to make an entire house using just a screwdriver and a hammer. The solution is for organisations to innovate. They must look at new ways to manage and incentivise people, using the same mindset as they would for product development,” he adds.