Why incentives don't work in education—or the business world | Opensource.com

Why incentives don't work in education—or the business world

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Even as the U.S. economy recovers from a financial meltdown led by a number of white-collar Wall Street swindlers, critics of the public education system push for more “business” in the classroom: specifically the implementation of incentives and the hiring of CEOs for superintendents.

There's just one little problem. According to 40 plus years of academic research, incentives—and disincentives—don't normally work. And when they do, they often don't make people behave quite like their proponents anticipate.

In June the New York Times published an article exposing a number of instances of cheating on standardized, “high stakes” tests in public schools. And the guilty party? Not the students.

From  Houston teachers with a $2,850 bonus on the table to thirteen educators and 2 principals in Georgia who faced the possibility of job loss, cheating is present at alarming levels among today's school staff. Data forensics specialist John Framer told the New York Times, “Every time you increase the stakes associated with any testing program, you get more cheating.”

For educators and administrators, the stakes couldn't be much higher. In addition to financial incentives that reward top performers, school districts and state programs often include provisions for firing or demoting teachers and principals, while their schools may be put on probation or lose crucial accreditation.

Gaming the system

Beyond ordinary cheating lies a gray area that is concerning to most organizations with an incentives plan. Author Daniel Pink offered an example in his recent Telegraph article that should be familiar to anyone who has worked in sales:

“In the early days of the [Red Gate Software] company, [co-founder Neil] Davidson created a fairly straightforward commission scheme. But, of course, salespeople figured out a way to game it – by pushing sales into the time period most advantageous for them, by underselling one month to show a bigger gain the following month, and so on. This wasn't because they were unethical; it was because they were rational humans responding logically to a particular incentive structure.

So Davidson made the system more complex – and salespeople responded by increasing the complexity of their own behavior. On and on it went, until both the management team and the sales force seemed more focused on the compensation system than on making great software and selling it to customers who needed it.”

When the company decided to scrap the commissions plan and simply pay the sales staff a “healthy flat salary,” the sales team generated more revenue.

Backfiring
In a recent FastCompany article, Dan and Chip Heath, authors of the book “Made to Stick,” said that incentives often yield “collateral damage.” The Heaths point to examples like NFL quarterback Ken O'Brien, whose unfortunate habit of throwing interceptions led a team lawyer to add a clause to his contract that penalized him for each interception.

“The incentive worked as intended,” the Heaths said. “His interceptions plummeted. But that's because he stopped throwing the ball.” When the penalties for failure are high, people take fewer risks, which leads to a reduction in innovation and often overall performance.

According to Freakonomics author Stephen Dunbar, you can't simply “divide people into piles of good people or bad people, cheaters or non-cheaters. The point is that people’s behavior is determined by how the incentives of a particular scenario are aligned.”

This is nowhere more true than in the much-lauded business world. Slate places the blame for the Wall Street crisis and BP's oil spill on “the law of incentives.” In each case, journalist Eliot Spitzer said, placing the burden of risk on the public while businesses kept the profits had the effect of removing all sense of responsibility from executives and led to disaster.

If not incentives, then...
So what motivates workers, if not punishments or rewards?

Open source may have some answers there. Every day, programmers around the world generate high quality code for open source projects—often for free.

Yet the Heaths' article mentions a production-increasing initiative by AT&T executives where programmers were paid for each line of (proprietary) code they produced. They weren't more productive; they simply generated a whole lot of extraneous code.

Open source coders and other highly motivated workers share three characteristics, according to Pink: purpose, autonomy, and mastery. The coders contributing to an open source project—some of whom may well be working for AT&T—are intrinsically motivated to do quality work. It seems that offering external motivation (in the form of money) should further increase their interest in a project. But in fact, the opposite occurs.

Social science researcher Alfie Kohn theorizes that the more an executive gets employees to think about what they will earn for doing their jobs well, the less interested they will be in what they are doing.

“Loving what you do,” Kohn said, “is a more powerful motivator than money or any other goody.”

If Kohn and Pink are correct, the key to “motivating” our teachers and our workers may be rather simple. Pay them enough that they don't have to think much about money, then let them do their jobs as they see fit.

About the author

Rebecca Fernandez - Rebecca Fernandez is a Principal Employment Branding + Communications Specialist at Red Hat, a contributor to The Open Organization book, and the maintainer of the Open Decision Framework. She is interested in open source and the intersection of the open source way with business management models.