Do Bigger Bonuses Drive Better Performance?
Dan Ariely discusses an experiment in which he attempts to determine the relationship between performance and size of possible bonus. Interestingly, bonus size was negatively related to performance. From the post:
I’d be willing to bet that for the vast majority of bankers, if not for all of them, a multimillion-dollar compensation package could easily be counterproductive because of the stress involved in attaining it, because of the fear of not getting it, and because it takes their minds off the job and focuses their attention on the large bonus.
My reaction (which was similar to the executives quoted in the post) is probably unsurprising to most people: “I can see how that would be true. But me? No, no, that doesn’t apply to me.”
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