Do Employee Bonuses Really Boost Performance — or Do They Quietly Undermine It?

At first glance, it feels almost self‑evident: If you want people to work harder, reward them with bonuses. 

Pay for performance. Sharper targets. Bigger payouts. It’s the logic many organizations follow and it sounds perfectly reasonable. 

Most accounting firms, especially partnership‑based firms, lean heavily on financial incentives to drive business development. But research shows financial incentives often change why people work, not how well they work. 

A large field study conducted with Marylène Gagné and colleagues, suggests that the assumed link between bonuses and better performance is far from guaranteed. In fact, in some cases, bonuses may reduce business performance. 

The research followed over 600 sales employees over two years after the introduction of substantial quarterly and annual bonuses of roughly $20,000 per year, all on top of existing base salaries. 

The results were surprising. 

What Happened to Employees after the bonus system rolled in? 

• Employees felt less control over sales outcomes 

• Extrinsic (money-based) motivation increased 

• Meaning and enjoyment declined 

• Effort increased — but only marginally 

• Staff Turnover intentions rose as bonuses grew 

What Happened to the Business? 

• No overall increase in total sales 

• Increase in unwanted competitive behaviors (client poaching, gaming quarterly numbers) 

• New monitoring systems and controls had to be introduced 

• High performers sold about the same as before — just with bonuses attached 

In other words: The company didn’t buy more performance. It bought a shift in motivation. 

Why Motivation Quality Matters 

Before bonuses, much of the motivation came from meaning, purpose and enjoyment.  The kind of motivation strongly linked to better performance, well‑being, and long‑term commitment. 

After bonuses, the focus moved to one thing: money. 

So… Do Bonuses Work? 

That depends on what you mean by “work.” 

Do they change behavior? Yes. 

Do they improve organizational performance? Not necessarily. 

The Real Question Leaders Should Ask 

Before redesigning compensation systems, leaders often ask: Will bonuses motivate people? 

But the better question is: 

What kind of motivation are we creating — and what might we quietly be undermining? 

Key Implications for Accounting Firms: 

1. Bonuses may not increase meaningful business development activity. 

2. Incentives risk shifting motivation from purpose to money. 

3. Incentives can trigger unhealthy internal competition. 

4. High performers don’t necessarily respond to sales bonuses. 

5. Intrinsic motivation is the real growth driver in professional services. 

What Firms Should Do Instead: 

• Make Business Development meaningful. 

• Build capability, not pressure. 

• Recognise behaviours, not just results. 

• Support teams, not monitor them. 

• Use bonuses sparingly and strategically. 

Sources & Acknowledgements: 

Still Gagne et al (2025, ref below) state «Don’t neglect fair base pay—but don’t expect it to do the motivational heavy lifting. Ensure a secure, fair salary (for equity and basic needs) so employees can focus on their work, not whether they will be able to pay the bills this month.» and that is important! (https://lnkd.in/ewP7NHaW) 

 
📄 Reference (APA): 
Kuvaas, B., Robert Buch , R., Marylène Gagné , M., Anders Dysvik , A., & Jacques Forest , J. (2016). Do you get what you pay for? Sales incentives and implications for motivation and changes in turnover intention and work effort. Motivation and Emotion, 40, 667–680.