Cases where incentives backfire

A president's dilemma

I was listening to the troubles of a president of a certain transport company.
According to him, drivers quit as soon as they are hired.
He spends a considerable amount of money every month on recruitment ads on specialized job search engines. It is only natural that he would not want to waste those recruitment costs.

...However, when I heard about the turnover prevention measures he was planning to implement, I panicked and did my best to stop him.

What was the president trying to do?

He was planning to offer incentives based on the driver's length of service.
Specifically, he intended to keep increasing the contract unit price by several thousand yen every time a driver continued the work (contract) for six months. Even though it was none of my business, I felt a bit horrified.

Principal-Agent Theory

There is a concept called Principal-Agent Theory.
The principal refers to an employer, teacher, or parent, while the agent refers to an employee, student, or child. The principal essentially tries to get the agent to do what they want, but because the agent tries to prioritize what they prefer over the principal's demands, the relationship between the two inevitably becomes very delicate.
In that relationship, when a principal offers an incentive, it is the same as sending a message to the agent that "this job is undesirable for you." Yes, by offering an incentive, the agent subconsciously senses even before taking the job that "it must be a job that everyone dislikes, which is why there is an incentive attached."

Brian Knutson's research

According to an experiment conducted by Brian Knutson, a neuroscientist at the National Institute on Alcohol Abuse and Alcoholism in the United States, it was found that in games involving money, when one realizes that they are likely to win cash (anticipating a reward), a part of the brain called the nucleus accumbens is activated (dopamine is secreted all at once).
What is scary is that the anticipation of an incentive triggers the same reaction as "when you think you are likely to win a bet." It is very similar to the mechanism of addiction to alcohol or habit-forming drugs.

Why this incentive is a bad move

To summarize why the incentive the president was planning (a measure to add several thousand yen after continuing work for six months) is a bad move:

1. Drivers will have a negative impression of their job from the start
2. Drivers will continue to get raises without making any effort
3. Costs will gradually rise, and profits will be squeezed without being able to invest in anything

Do you understand?
This incentive measure might stop drivers from quitting, but there is a high possibility that it will create a worst-case team that (over a long period) has low motivation, no desire for improvement, and high costs. And both the drivers and the management will end up in a state like drug addiction, eventually hitting a dead end.

How to use incentives correctly

As a major premise, the basic compensation line must be fair.
If it is not fair, anxiety and dissatisfaction will spread.
On top of that, incentives should only be applied to routine work, and should be paid when (boring) tasks that must be performed according to a manual are completed within a set time and with quality above a certain standard.

◇◆◇◆◇◆◇◆◇◆◇◆◇◆
Thank you for reading to the end.

I have listed the articles I have written so far in a sitemap.
Please take a look.
<<A person who thinks scientifically>>