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Time to rethink how performance is measured and rewarded

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Ever wonder why some employees are unable to perform well despite the numerous incentives your organisation has in place? You might be inclined to assume that these employees are just not putting in enough effort, however that couldn’t be further from the truth.

According to neuroscience research sponsored by the Chartered Institute of Management Accountants (CIMA), academics from the Erasmus University’s Rotterdam School of Management and the University of Ljubljana in Slovenia found that monetary incentives and social pressure can result in employees working harder, but it doesn’t improve performance for work that requires vigilance and attention.

The academics measured and analysed participants’ brain activity, using functional magnetic resonance imaging (fMRI), while they performed a series of computer-based tasks, measuring their ability to assess information under different time pressures and types of distractions.

Distinguishing between situations in which participants received a monetary reward for speed and accuracy and where they experienced social pressure to perform well, they found that while both situations resulted in people working harder, their performance seemed not to improve for work that requires vigilance and attention.

ALSO READ: 3 things leaders should know about rewards management

If that is the case, then should organisations rethink they way they measure and reward work performance?

Prof. Dr Frank Hartmann, professor of management accounting and management control at the Rotterdam School of Management, Erasmus University, said: “If basic biology limits our ability to improve at certain types of work, we need to think more imaginatively about the way we measure and reward work performance.

“It may be much more task specific than we are currently inclined to think. Businesses need to recognise where performance limits may lie and avoid frustrating employees when results do not reflect best efforts.”

Hartmann suggested that organisations should take care that performance assessments accurately capture the efforts of workers (not just results), both to measure whether targets and incentives are effective and to ensure that individuals are rewarded fairly.

Dr Ian Selby, director of research and development at CIMA, said: “Modern companies have a large set of incentives available to them, yet many keep reaching for two in particular: exerting pressure from above, or incentivising through bonuses. In many cases these tactics work, but as this research indicates, sometimes these are simply the wrong tools for the job,” he observed.

“The solution is for organisations to innovate. They must look at new ways to manage and incentivise people, using the same mindset as they would for product development,” Selby added.

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