London School of Economics research shows opposite effect of performance-based pay.

Performance-related pay doesn’t encourage performance

From the website, Management Issues:

The clue ought to be in the name. Performance-related pay is pay for performance, and the better performance you turn in and the harder you work the more you will get to take home. Except, academics are now suggesting, more often than not the opposite may be the case.

New research by the London School of Economics has argued that, far from encouraging people to strive to reach the heights, performance-related pay often does the opposite and encourages people to work less hard.

An analysis of 51 separate experimental studies of financial incentives in employment relations found what the school has described as “overwhelming evidence” that these incentives could reduce an employee’s natural inclination to complete a task and derive pleasure from doing so.

Read the full article here.