‘The effects of financial incentives are often underestimated’

The precise design of a reward system is crucial, Dur argues. Even employees in socially oriented professions, such as healthcare and education, are sensitive to financial incentives. Research among mental healthcare professionals, for example, found that financial rewards for additional treatment hours resulted in more hours and higher claims, but did not make treatments more effective. ‘The incentive was well-intentioned, but it had the wrong outcome,’ Dur says. 

Dur also advocates clearer criteria for executive pay. He is critical of vague KPIs and argues that senior executives should more often be rewarded based on their performance relative to comparable companies. This would help prevent executives from receiving higher rewards because of factors largely beyond their control, such as a sharp rise in the oil price. 

Dur also challenges the assumption that existing organisational and reward systems are automatically the right ones. In his view, organisations make too little use of experiments to test whether their systems actually work. ‘The value of field experiments (large-scale pilots in which an organisational change is first tested) is still underestimated,’ he says. 

An experiment at the now-defunct Free Record Shop illustrates the value of such an approach. A bonus designed to encourage employees to sell additional products at the checkout did increase additional sales, but it also led to longer queues and ultimately lower total turnover. The experiment therefore prevented the bonus scheme from being rolled out further. ‘Discovering what does not work is often just as important as discovering what does work,’ Dur says. 

Dur also believes that differences between generations in the workplace are often overstated. Recent research shows that generations have much more in common than is often assumed. Young employees, for instance, also pay close attention to financial rewards. Dur therefore advocates robust, representative research into employee motivation and satisfaction rather than relying on popular assumptions.