Wells Fargo, the largest U.S. bank, has provided us with a great example of the power of pay as a motivator. Its incentive program, which provided payouts to managers, employees and executives for opening new accounts, resulted in millions of new, falsely opened accounts.
Once again, it is made clear that pay can be a powerful motivator of behavior. This tends to be forgotten when articles are continually written about the importance of non-financial rewards such as meaningful work and social purpose.
However, the high motivational power of pay does not mean that it should serve as a motivator throughout organizations and under all conditions. Money should only be used when reasonable goals can be set and measures of how these goals are achieved are present.
When excessively high or difficult goals are set, individuals either do not try to achieve them or try to achieve them by beating the system. When the method in which the goals are achieved is not measured, as in the Wells Fargo case, some individuals will use unacceptable means to achieve them.
It is clear when money should be used as an incentive. First, there needs to be sufficient money available so that a significant reward can be given for outstanding performance. Second, money should be used when it can be tied to clearly specified goals that are achievable and do not represent an excessive amount of "stretch." Third, it should be used when individuals' performance can be measured accurately and comprehensively.
When significant financial rewards are being offered, if there is a way, some individuals will inevitably try to beat the system. While the employees who try to beat the system are to blame, they are not the only problem. They may not be the major problem; rather, it lies with the management and culture of an organization that does not develop a comprehensive approach to measuring how goals are achieved.
Financial rewards can be powerful motivators of behavior but should be used with caution and only in situations where management has created a culture and goal-setting process that leads to reasonable goals and the comprehensive measurement of individual behavior. Thank you, Wells Fargo, for reminding us of this.