Why Bonuses are like Torturing Dogs

The following is a description of an experiment, which, more or less, involves torturing dogs.  Give dogs collars which shocked them at random intervals.   For some of those dogs, make sure the collar stops giving them shocks when they enter a particular area – for other dogs, just keep giving them shocks, randomly.  For the dogs who can escape the shocks, most of them figure out, quite quickly, how to do it.  Clearly the dogs who can’t escape don’t.

Later give the dogs different collars.  Specifically, give the dogs collars that give random shocks, but stop if they jump over a wall to a different area.  The dogs who previously found out how to stop getting shocks quickly learn to jump the wall, and escape again.  The dogs who found no way to escape the shocks don’t even try.  They just lie down, whimper and suffer.

Essentially, the dogs who got the unstoppable shocks learn that there is nothing they can do.  They learn to be helpless.

Now consider bonus culture.  I’m a software engineer – sure I play my part in making my company more successful, but there isn’t much I can do on my own.  I’m part of a team.  Any fixes I make to our code, any features I add, often don’t have an effect for motnhs or years after I have made the changes.  Also I get paid a bonus.

Now, at a previous company, this bonus was related purely to department performance.  Which might sound good – I’m part of the team – I play my part.  If we do well, the company does well.  We deserve bonuses, right?  Well, in a particular year we had a goal : to drive sales to a new high.  And – despite the fact we wern’t involved in sales directly, we helped the sales team in a number of ways – and sales hit the new high.  Unfortunately the way our bonus was calculated was how much we added to the turnover of the company as a whole.  But our departments sales were mainly in europe.  And our company was based in the US.  And the exchange rates wavered.  Despite the fact we had made a new record in sales across Europe, on the day company figures were released, the euro was down against the dollar.  Our success was entirely wiped out by exchange rates.

This made me feel like a dog with a shock collar that can’t be stopped.  I have no control over exchange rates – yet I’m going to be rewarded if they are one way and punished if they fall another way.  I have no control at all.  No matter how much work I put in, the exchange rates are going to beat me.  The bonus isn’t a system that inspires me to work hard – its a system which teaches me to be helpless.

Now at another company my bonus is related to meeting specific goals, multiplied by how well the company has met its goals.  Now int his case, I can’t affect the company’s goals, the company is too big.  But I can affect my performance.  However I have no idea if at the end of the quarter, the company is going to report a big number, or a small number- and so I don’t know if exceeding my goals is worth a lot or a little.

This shouldn’t be a problem:  I like to work hard and exceed my goals.  I feel responsible for how good my work is.  Its important to me.  But psychologists know: when money is put on the table, it changes things.  And it isn’t clear how hard I should work to get my bonus.

Here is what would work better:  Tell me you’re going to give me a bonus based on last quarters results, multiplied by my performance in the next quarter.  That way I know how much my hard work is worth.  But also give me the option of choosing – before quarterly figures are out – of choosing to take my bonus multiplied by the current quarter’s results.  So if there was a poor quarter, I can be inspired to work harder to help change things.

But don’t just give me random shocks and rewards and expect me not to just give up and do my job and no more.  That just doesn’t make sense.

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