Are Incentives Actually Holding You Back?

“People can become so afraid of losing their lucrative reward that their performance fails”

Boost performance. Reward employees. Increase the incentive.

Businesses small and big, keep talking about offering rewards and improving incentives to employees. It’s the same with us; we seek higher income opportunities and greater rewards for our efforts online.

We’ve always believed that the greater the reward, the harder and better we worked.

That notion is true – but only – as long as the stakes are low, say researchers.

According to them, the more money people are offered as a ‘reward,’ the more likely they are to fail at important moments.

They talk about investment banking where huge performance-related bonuses are offered to people. They have seen that if the “carrot” being dangled is monetary, people’s performance actually drops – instead of improving, as people tend to focus more on losing the huge reward.

Let’s take the basis of how one of the research studies was conducted:

Participants of the study had a screen in front of them with a virtual object on it. They had to lead the object into a square by moving the index finger on the screen. This object had a tracking device attached to it. The incentive amounts for leading the object successfully to its destination ranged from $0 to $100.

After some practice, participants were placed inside an MRI machine and they had to perform the task from inside. This was done to uncover important data from the brain, to see why they reacted/responded in a certain way.

Over hundreds of trials, researchers noticed a strong trend that showed the performance of the participants getting better as the incentive increased.

Now this makes sense, as this is what we expect.

But what was surprising was the fact that once the reward level crossed a certain threshold, the performance of the participants was poor.

This means, up to a certain level it kept on increasing, but as the reward got even bigger, the performance levels of the participants dropped.

Researchers figure that this has to do with fear dominating the mind when confronted with a higher reward.  Interesting, huh?

Several subsequent studies revealed that people are excited with the prospect of receiving a reward or incentive.Their first thought revolves around the “gain” that’s involved. But when they actually get down to performing the task, they begin worrying about not being able to win that reward, even if there’s no loss involved in trying. The feeling that they may not be able to get that cash instills a fear, reducing their ability to perform.

This research has been going on for many years. Previous studies also indicated that performance declines with that extra cash incentive. But earlier, it was believed that this happened because of excitement. But now, with the crucial information from the brain-scans, researchers believe that it’s not excitement but fear – fear of losing such a good opportunity to earn a big prize amount.

This is somewhat of an unexpected conclusion contrary to what we have known all along.  When I first read about it, it surprised me. Isn’t working harder towards a bigger earning potential the way things worked?

When I actually started thinking about the whole thing, this notion made sense in a lot of ways.

Even those of us with huge financial goals, have been told to break it down into shorter goals to make it more achievable. It may perhaps have something to do with bigger incentives seeming unachievable and affecting our performance levels.

Look at it this way. Thinking “big” may seem like the right thing to do. But how big?  If you’re starting out with online marketing, having a goal of a million dollar annual income may make you feel confident initially, but does it really act as a motivator?

You set a goal of a million dollars. You’re starting out, so things are slow. Looking at those six zeroes on a piece of paper can create a panic in your mind. When are you going to do what it takes to achieve that? How long is it going to take? These questions haunt your mind.

Does that mean you stop thinking big?

I still think it’s a good idea to have big scary long-term goals. But setting short-term goals is the perfect way of achieving those long-term goals. When the incentive is big, it can get scary and you have no clue whether you’ll be able to achieve it and you don’t want to let go of that reward, leaving you concerned.

Breaking the huge reward into smaller rewards to be won over a period of time helps you get your hands on them easily.

Confidence is an essential ingredient of success and exaggerated confidence may actually increase the probability of success. However, overconfidence has been seen to increase anxiety that leads to faulty assessments and hazardous decisions.

The craze for big rewards remains prevalent in online marketers. But do it one step at a time and you can meet all your goals on your journey to that million-dollar carrot.