Are your incentives rewarding behavior you want to stop?

Trace each rewarded measure to the easiest way someone could improve it and the useful work that could be neglected. Revise the incentive with affected managers and qualified advisers before changing compensation commitments.

An incentive consequence audit is a comparison of rewarded measures with the behavior and neglected work they may encourage. This article uses the term as an applied working label. Its closest research reference is Steven Kerr’s 1975 analysis of misaligned reward systems, which examines cases where rewards encourage a behavior different from the one management intends. The proposed method below is advisory guidance rather than a tested psychological scale.

Recognize the decision behind the pressure

Composite recognition scene: You check the sales dashboard from home and see a target exceeded. The next message describes unplanned delivery work that the reward calculation never counted. This is an invented illustration of a leadership pattern, not a client story or evidence about a particular person. Use the scene to identify the work choice that needs attention, without drawing conclusions about anyone’s psychological condition.

The audit starts with a specific difference between what management says it values and what the reward system pays for. Compare the stated outcome with the calculation employees face. Investigate the work pathway before attributing motives. A target can create a predictable tradeoff even when the people responding to it follow the published rules.

A performance measure records one aspect of work. An incentive changes the consequences attached to that measure; a useful measure can become a poor reward target. Trace the rule from eligibility through payment and ask what behavior a person can reasonably use to meet it. Compare that route with the intended business outcome. A conflict between the two justifies reviewing the scheme before attributing misconduct to someone who followed its terms.

What the research supports

Ryan and Deci’s 2000 review distinguishes different forms of motivation and examines social conditions around autonomy, competence, and relatedness. Use those distinctions to ask how people understand a reward’s requirements and choices. Do not infer that all external rewards are harmful. Compare the actual rule and observed work before deciding whether the incentive, its explanation, or another constraint requires correction.

Colquitt’s 2001 organizational-justice dimensions provide separate questions about an incentive’s outcome, eligibility procedure, interpersonal handling, and explanation. Add those questions to the consequence table when a rule appears inconsistent. A clear formula does not settle whether the procedure applies consistently. If compensation terms may change, involve authorized HR, finance, and employment counsel rather than using the audit to revise existing pay obligations informally.

Kerr’s 1975 article examines reward systems that pay off for one behavior while their designers hope for another. Use its central problem as a reason to inspect consequences of your own incentives. The article does not establish that a specific employee is gaming a target. An audit should identify plausible routes and verify actual behavior before attributing intent.

Edmondson’s 1999 research concerns shared beliefs about interpersonal risk within a team. An incentive audit needs a way for employees to report that a target conflicts with required work. Ask for the rule, the available choices, and the consequence. Do not make reporting the conflict an admission of misconduct. This proposed table organizes evidence; it is not a validated test of an individual’s motives.

The rewarded-behavior consequence table

Choose one target and one review period for the five-step audit. Bring the calculation, eligibility rules, related quality requirements, and examples of actual work. Identify who may change the scheme and who can explain its terms. Keep a proposed redesign separate from any allegation about an individual’s conduct, which requires its own evidence and process.

1. List rewarded measures

Include informal praise and promotion signals alongside formal incentive payments.

Collect the actual rules used to determine rewards, including exceptions and management discretion. Compare the written plan with the signals employees receive in promotion and recognition decisions. Ask the plan owner to explain a normal calculation and a disputed one. Keep the audit focused on what the arrangement rewards rather than beginning with accusations about employee character.

2. Trace the easiest improvement path

Ask how someone could raise the measure while delivering less useful work.

For each measure, ask a knowledgeable employee how its reported result could improve without improving the underlying work. Include shortcuts available within the rules, not only dishonest reporting. Use a hypothetical route until evidence establishes actual behavior. Ask what a reasonable person trying to meet the target would prioritize when time or resources are constrained.

3. Map the neglected consequence

Identify the customer or colleague who would carry the cost of that shortcut.

Follow the work across the handoff. A sales measure may leave delivery effort outside its calculation; a response-time target may omit whether the issue was resolved. Identify who receives the consequence and what records could reveal it. Do not add another metric immediately. First decide which neglected outcome matters to the purpose of the incentive.

4. Design an authorized revision

Review the proposed measure, guardrails, and compensation implications with appropriate specialists.

Ask the authorized compensation and business reviewers to consider the proposed revision together. Specify what behavior should change, what unintended response remains possible, and how existing commitments will be handled. Have HR and counsel review employment or pay implications. Do not announce a change to compensation as an experiment before the responsible people have approved its terms.

5. Inspect behavior after the change

Look for new shortcuts and displaced work instead of assuming the revised target is complete.

After implementation, inspect complete work examples instead of viewing the reward dashboard alone. Ask whether effort moved to an unmeasured activity or a different shortcut. Include the people who receive downstream work in the review. Keep the option to revise the design when the intended behavior is absent, even if the new target is being achieved.

Build the behavioral consequence table

Use columns for the rewarded measure, the intended work, the easiest shortcut, the person carrying its cost, and the evidence needed. In a hypothetical sales incentive, a booked order may be rewarded while unplanned delivery work remains invisible. That is a question to test, not an allegation about a salesperson. Ask delivery staff what the commitment requires and compare the answer with actual authorized orders. Review any compensation change with qualified owners before announcing it.

Language to use during rewarded-behavior consequence table

Use this wording with the managers who own the incentive and employees who can explain its practical effects. Replace placeholders with verified rules and examples. Check contractual or compensation implications with the proper specialists before proposing a change. Make clear whether the conversation is gathering evidence or communicating an approved revision.

Our stated goal is [useful outcome], while the current reward is calculated from [measure]. The possible gap is [specific shortcut or neglected work]. We are examining the design, not assuming misconduct. [Authorized owner] will review the evidence and any implications for existing commitments before a change is proposed. Please show us a work example the calculation misses.

Use this instruction to clarify the next action: map the neglected consequence. Say what that means in the actual situation rather than reciting the method’s name. Invite correction of facts, and distinguish a request for correction from a demand for agreement.

If employees describe the audit as an attempt to avoid paying earned rewards, separate the review of future design from decisions about existing commitments. Ask the authorized reviewers to address those concerns directly. Do not use a suspected shortcut as grounds for changing an individual’s pay without the appropriate evidence and employment process.

Work through a hypothetical rewarded-behavior consequence table

In the hypothetical sales case, a contract meets the booked-revenue target but requires work the delivery team did not price. Put that consequence beside the rewarded measure. Ask who can change the qualification rule before assuming the salesperson acted improperly. The audit should reveal the gap between the contract counted and the work the company must perform.

Now suppose management adds a delivery-quality measure. Rehearse how it will be assessed and challenged. A disputed quality rating may require clearer standards or evidence. Do not claim the second measure solves the first problem until an authorized review can explain how both measures apply to an ordinary contract and an exception.

Finally, consider a team that protects its measure by declining difficult cases another team must accept. Review the work allocation as well as the formula. Ask whether the incentive rewards a local improvement while shifting the cost elsewhere. Keep the proposed repair tied to the overall business task, not to making every dashboard look equally favorable.

The record for rewarded-behavior consequence table

Keep the target definition, reward calculation, observed tradeoff, supporting examples, and authorized response together. Label a suspected consequence as a hypothesis until checked. Avoid creating a list of supposedly unmotivated employees. Give the scheme owner responsibility for updating the record when a rule changes so later reviews compare behavior against the terms in force at the time.

Retain the reward rule, hypothetical shortcut, affected handoff, supporting work examples, and authorized design decision. Keep individual allegations separate from design hypotheses. Record why a proposed measure was accepted or rejected. A compensation specialist should determine how calculation records and employee information are handled, rather than storing a public list of suspected target manipulation.

Use this completion check before closing the discussion:

What action earns the reward in practice?
Can the measure improve while useful work deteriorates?
Who receives work excluded from the calculation?
Which commitments constrain a proposed revision?
What complete work example will test the revised rule?

A plausible shortcut is a design hypothesis. Verify behavior before alleging misconduct, and use the proper employment process for any individual concern.

Review rewarded-behavior consequence table in practice

At the next employee commitment review, examine this specific signal: whether the rewarded behavior matches the intended work and foreseeable shortcuts receive explicit controls. Compare the result with the original working note and inspect at least one completed action. Avoid reporting improved confidence or a calmer meeting as proof that the operating problem is resolved.

Compare the revised incentive with the original unwanted behavior. Look for corrected handoffs, continued exceptions, and new ways to obtain the reward without the desired result. Ask downstream teams for concrete examples. Keep the audit open to changing the measure again rather than interpreting achievement of the revised target as proof that incentives are now aligned.

Have employment counsel and compensation specialists review pay changes and existing commitments. An audit identifies possible consequences; it does not establish misconduct by an employee.

For related preparation, use How CEOs can build motivation that survives hard quarters, When do rewards help motivation, and when do they hurt?, How to recognize good work without sounding formulaic, How to tell when a useful metric is becoming the target. Choose the guide that addresses the next concrete decision, and keep responsibility with the person authorized to make it.