How Incentives (Don’t) Work

2. January, 2013

Ever wondered why companies do better when they don’t pay bonuses to managers?

In a nutshell, incentives occupy your brain. If your brain has to make complex decisions, then incentives reduce the amount of free brainpower available to solve problems. The result is poorer performance, not despite, but because of the bonus.

For details, see my old (updated) blog post: Bonus is Bad For Motivation