Once employees are hired, how does an employer get them to produce, achieve and excel? They may be motivated to do well, but lack the tools or skills necessary to achieve their goal, whether it be signing up new clients or discovering new revenue streams.One of the first few posts I wrote on this blog chronicled a story about a pilot program in several New York City public schools that offered monetary or material incentives (such as ipods or gift certificates) to students for doing “typical” student tasks such as attending classes, completing homework assignments or achieving high scores on standardized tests.

Ronald Fryer, the head of one such project had this to say about the program in a January interview with U.S. News & World Report:

“Roland Fryer, a Harvard professor of economics, says it’s “absurd” to expect children who grew up in poverty, with parents who, for example, dropped out of school, to appreciate the value of education without giving them immediate rewards for taking school seriously. As the chief equality officer for New York City public schools, Fryer oversees a pilot program that pays students from low-performing schools $25 and $50 for doing well on standardized tests. “We’re not undermining this idea of learning for the love of learning,” Fryer says. “We’re trying to cultivate it by making education tangible for these kids.”

Eight months later the results are in:

Money does not singularly improve performance.

According to the New York Times, a similar program encouraging high school students to take and score highly on Advanced Placement exams has produced more test takers, but less high achievers than in the previous year (with no monetary incentive).

“Offered up to $1,000 for scoring well on Advanced Placement exams, students at 31 New York City high schools took 345 more of the tests this year than last. But the number who passed declined slightly, raising questions about the effectiveness of increasingly popular pay-for-performance programs in schools here and across the country.

Students involved in the program, financed with $2 million in private donations and aimed at closing a racial gap in Advanced Placement results, posted more 5’s, the highest possible score. That rise, however, was overshadowed by a decline in the number of 4’s and 3’s. Three is the minimum passing score.”

About 400 more students took the test this year this last, most, presumably, to have a shot at taking home about $1000. Yet, while they were motivated enough to show up, the students were unable to achieve a high enough score to pass, failing to achieve the desired effect.

Does money offer only enough motivation to try but not to succeed?

“I’m just dumbfounded that they can regard this as an achievement or as a great improvement or as something worth spending the money on,” said Sol Stern, a senior fellow at the conservative Manhattan Institute, who had expressed cautious support for the Advanced Placement program when it was announced last fall. “I’m surprised that that kind of money, that kind of incentives, doesn’t produce better results. It sort of undercuts the argument that the problem is the question of motivation.”

I tend to agree with Mr. Stern. In the business world, we are offered monetary incentives to show up to work everyday in the form of a paycheck. It’s enough to get people through the door everyday, but once they’re there, how does an employer get them to produce, achieve and excel? The employees may be motivated to do well but may lack the tools or skills necessary to achieve their goal, whether it be signing up new clients or discovering new revenue streams.

Offering a student $1000 to do well on a test but not ensuring that they have adequate preparation or good study habits sets many students up to fail. A student may really, really want that $1000, but, never haven taken an Advanced Placement test before, may not have figured out the best test-taking techniques, or found the material too challenging or just had an off day during the exam. In that case, the money would have been better spent on prepping the student rather than incentivizing them. Motivation wasn’t the missing piece in this equation, it was the skills and knowledge needed to score well on the exam.

My own experience with bonus programs in the workplace has been mixed. I once worked for a company that proudly boasted that its bonus program accounted for roughly 15% of total employee compensation. The bonuses were based on company wide financial projections and were handed out at the end of every quarter. After several quarters of poor financial performance many employees (including myself) were starting to get upset about the smallness of our paychecks. Complaining about it one night at dinner to a friend, who worked for an hourly paid wage and didn’t receive bonuses (but did get time and half for overtime), dismissed me without sympathy saying I was lucky to get a bonus at all.

My response was,

“How would you feel if you worked hard all quarter and then, because of circumstances out of your control, you only received 85% of your pay?”

Talk about de-motivating.

I think the real problem is that there is no one way to motivate everyone. Some people might find that extra money in their pocket enough to out perform others. Some might value the competition with other students/employees for top prize. And then others might put more emphasis on perks like flexible hours or free food. The trick for managers is to get to know their employees, find out what makes them tick, and then create an incentive that plays to their natural motivation.