Offering Incentives As Motivation Could Backfire On You

Why are business incentives dangerous for employee motivation

“incentives in my personal opinion are one of the most dangerous ideas ever to hit business”

— Eben Pagan

Incentives can destroy intrinsic motivation by turning enjoyable work into transactional behavior. Research shows people lose interest in activities they previously enjoyed once external rewards are removed.

What happens when you remove business incentives from employees

“once someone gets something it's theirs forever that's it it just gets integrated in as theirs forever”

— Eben Pagan▶ 5:16

You cannot successfully remove incentives once they're implemented. Employees expect to keep them permanently, and you lose the ability to test whether they would perform without rewards.

How do incentives cause employees to game the system

“the first type of behavior that it creates is how do I work the system how do I game the system to get what I want to get out of it”

— Eben Pagan▶ 5:28

Incentives shift focus from genuine performance to manipulating metrics for rewards. This creates behavior focused on working the system rather than achieving real results for the business.

What type of employees should you hire instead of incentive-driven ones

“I prefer to find stars who that's just not really how they operate they know that in the long run if they perform they're gonna get the check”

— Eben Pagan▶ 7:56

Hire star performers who think long-term and understand that consistent performance will be rewarded over time, rather than those motivated by immediate incentives and rewards.

Can you test if someone would work without incentives

“how are you gonna ever know whether or not they would have done it on their own how are you gonna figure it out now you're stuck there is no test after that”

— Eben Pagan▶ 4:24

No, once you introduce incentives you lose the ability to test natural motivation. There's no way to determine if someone would have performed the task without the reward.

What problems do incentivized salespeople create

“the people that are motivated by incentives are the smooth talkers and so you give them an incentive to do something and then what do they do they talk people into stuff by promising a little more than you can really deliver”

— Eben Pagan▶ 7:25

Incentivized salespeople often become smooth talkers who over-promise to hit their targets, creating conflicts with technical teams who must deliver what was promised but can't be delivered.

The Hidden Dangers of Business Incentives

Eben Pagan opens with a controversial stance that incentives are among the most dangerous business ideas ever implemented. He warns entrepreneurs to be extremely cautious when using them, as there are no systems to quickly give people intrinsic motivation, but there are proven ways to destroy it through external rewards.

Research Evidence: How Rewards Kill Natural Interest

A psychological experiment with children and coloring books reveals the counterintuitive truth about incentives. Kids rewarded with gold stars lost interest in coloring when rewards were removed, while unrewarded children maintained their natural enthusiasm. This demonstrates how external incentives can destroy intrinsic motivation.

The Permanent Trap of Incentive Dependency

Once incentives are introduced, they become permanent expectations that cannot be removed. Eben explains that changing commission structures typically fails because employees view rewards as permanently theirs, and you lose the ability to test whether they would perform without incentives.

Real-World Examples of System Gaming

A manufacturing story illustrates how incentives create 'work the system' behavior. A supervisor compensated on production moved finished products back onto conveyor belts to get double-counted, causing inventory losses and multiple management firings before the scheme was discovered.

Building Teams Without Incentive Traps

The solution is finding star performers who think long-term rather than chasing immediate rewards. These people understand that consistent performance leads to fair compensation over time, while incentive-driven employees often become smooth talkers who over-promise and under-deliver.