Carrot, Stick and the Right Tools for the Job

    The Pressure and Rewards of Work

    Last summer, the Chartered Institute of Management Accountants (CIMA) published a study they had commissioned from the Rotterdam School of Management and the University of Ljubljana in Slovenia, which looked at how a group of management accountants performed in a series of tests when put under pressure.

    You probably didn’t notice the report when it came out but you may have spotted it in the press this week, with the Independent newspaper reporting that “Job success is hardwired into employees from birth”. As is so often the case when newspapers report on research studies, that’s not actually what the report says but why let that get in the way of a good headline?

    What the report actually says is far more interesting. It noted that incentives of additional pay or peer or social pressure could have an impact on performance but that it was dependent upon what type of a person you were dealing with.

    The report was interested in how management accountants strike a balance between short-term results and the longer term benefit of the organisation. They referred to the focus on short-term decision making as ‘myopia’ and found that individuals who were more myopic were more likely to respond to monetary incentives.

    However, social pressure was a more effective tool to increase performance for the less myopic individuals tested.

    We thought this was interesting because one of the key elements in teaching people how to manage their finances effectively is educating them how to strike a balance between short and long term financial decisions. In very simple terms, if you buy something today, will you still have enough money left at the end of the month to pay your bills?

    The professor behind the study, Dr Frank Hartmann is quoted as saying that “If our basic biology limits our ability to improve at certain types of work, we need to think more imaginatively about the way we measure and reward work performance… Businesses need to recognise where performance limits lie and avoid frustrating employees do not reflect best efforts.”

    You can see how the press misinterpreted that, wilfully or not, to say that some people just won’t succeed because of their biology. But a more telling comment comes from Dr Ian Selby, Director of Research and Development at CIMA, who said, “This is a fascinating study, and it indicates that many companies are causing pointless stress to employees, or are wasting money on ineffectual bonus schemes…

    “There is a wider point too. Modern companies have a large set of incentives available to them, yet many keep reaching for two in particular: exerting pressure from above, or incentivising through bonuses. In many cases these tactics work, but as this research indicates, sometimes these are simply the wrong tools for the job.”

    Engage people and develop their performance in matters of financial education

    Given that the report was a neuroscientific investigation, there is no doubt that an innovative approach to incentivising people would work in many other areas too. We would argue that financial education is one area in which this would work – traditional forms of teaching and academic assessment are perhaps “the wrong tools for the job” and we should be looking at other ways in which to engage people and develop their performance in matters of financial education.

    We would argue that we’ve already begun to do that with our innovative game, Keep the Cash!, but this is something that should be being developed at a national level to ensure that, as a nation, we are able to educate each new generation to the best of their given abilities.



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