In the early 1900s, commercial fishing interests along the New England coast had a problem: the abundant seal population was reducing the fish supply. Convinced that fewer seals would be the solution, Maine and neighboring states began paying bounties for every seal killed. As proof, one simply needed to bring a seal’s nose to a town clerk and collect the reward.
But reality turned out to be far more intricate than what the policy’s creators envisioned.
For generations, the Passamaquoddy people of eastern Maine had hunted seals for food and clothing. By 1900, logging, fencing, dammed rivers, and mounting regulations had restricted the Passamaquoddy people’s access to their ancestral lands. Ocean hunting remained one of the few avenues left to maintain traditional subsistence practices, providing both food and clothing. As a result, when commercial interests pressured the state to eliminate local seal populations, they directly endangered an essential Indigenous livelihood.
In response, several Passamaquoddy hunters devised a clever workaround. Guided by traditional values that discouraged killing seals en masse, skilled artisans crafted convincing fake noses using small fragments of seal hide. A single pelt could thus produce dozens of bounty payouts. Suspicions rose in January 1904 after two Passamaquoddy men attempted to redeem 86 noses at once in Portland. The sheer scale of the operation was striking: claims spiked from 208 bounties in 1903 to 2,632 in 1904, prompting authorities to quickly end the program.
The scheme was illegal but reducing it to fraud over-simplifies the story. Commercial fisheries wanted to eliminate competition for fish, leading officials to establish a quantifiable metric (seal noses). Faced with a policy that threatened both their environment and their culture, the Passamaquoddy capitalized on the fact that the state was not truly paying for population reduction. It was paying for physical tokens.
It is a wonderfully absurd example of a serious management problem. Incentives require us to translate what we really want into something observable enough to reward. But the moment we define that, the measure itself begins to compete with the mission.
This problem is particularly acute in creative work. Leaders want innovation, so they reward patents, product launches, ideas submitted, revenue generated, individual performance, or promotion-worthy accomplishments.
But creativity works differently. So the right question is not, “Do incentives motivate?” because, of course, they do. The more useful question is: “What exactly do they motivate people to do?”
Research suggests that incentives shape creative work through at least three broad mechanisms: the effort type, the orientation of thought, and the quality of social interaction.
1. Type of Effort
In the 1990s, Safelite Glass Corporation changed how its windshield installers were paid. Instead of relying primarily on hourly wages, it introduced piece-rate compensation tied to output. Economist Edward Lazear studied what happened next.
Productivity per worker increased by roughly 44%. Part of the effect came from attracting and retaining more productive employees, but existing workers also increased their output.
This is an important place to begin because incentives clearly work.
But notice the character of the work. Both Safelite and the workers know what a successful windshield installation looks like. You could consider this kind of work a “routine” or a “predictable” task, where both outcome and the process to achieve that outcome are very well defined. Employees, therefore, have considerable control over accomplishing the goal and incentives encourage people to achieve the goal faster.
Creative work is different because the process (and sometimes even the goal) often do not yet exist.
Imagine asking one engineer to install ten more windshields and another to invent a radically better way of replacing automotive glass. Greater intensity is likely to help the first. The second may need to slow down, explore a strange possibility, discard several promising ideas, or spend a week understanding whether the problem has been framed correctly.
A meta-study analyzed 183 studies involving more than 200,000 participants. They found that both intrinsic motivation and extrinsic incentives predicted performance, but their relationships differed according to the type of performance. Intrinsic motivation was particularly important for performance quality, while incentives were comparatively more important for performance quantity.
Organizations often use the effort in the sense of intensity like working faster or longer hours. But creative work requires a different kind of effort that’s not as easily measured: searching broadly for alternative solutions, experimenting, tolerating ambiguity, or persisting through roadblocks.
A researcher under pressure to produce publications can work extremely hard while avoiding risky research questions. A product team can sprint heroically toward a launch date while failing to ask whether customers really need the product. An executive can relentlessly optimize quarterly results while starving experiments whose payoff lies years away.
In these cases, the incentives simply push effort in the wrong direction.
If the path is well-known, extrinsic incentives can accelerate progress. However, if discovering the path is the work, pushing harder may simply get people to the wrong destination faster.
2. Cognitive orientation
In an elegant series of experiments, Teresa Amabile and her colleagues, had children and adults perform creative activities under different reward conditions. The key manipulation was whether participants understood the activity itself as something they were doing in order to obtain a reward. Across the studies, explicitly contracting to perform the creative activity for a reward reduced the creativity of the resulting work relative to relevant comparison conditions.
The problem is not necessarily the reward itself. It is what the reward can do to attention. Without a salient external incentive, someone absorbed in a creative problem might ask: “What would happen if we tried the opposite?” or “What assumptions are we making?”
But when you make the reward salient, a different question enters the mental workspace:”What do I have to do to earn it?” That question can be highly productive when the task is unambiguous and predictable. But innovative work is often the opposite.
A meta-analysis of 60 studies found that rewards explicitly contingent on creative performance tended to improve creativity, particularly when accompanied by constructive, task-focused feedback and meaningful choice. Ordinary performance- or completion-contingent rewards, however, showed a small negative relationship with creative performance.
In other words, incentives become attention-directing devices. Tell a team you need twenty ideas and twenty becomes important. Tell engineers that they will be evaluated on lines of code and code volume becomes important.
Again, the employees aren’t behaving irrationally. They are learning what the organization has made salient and they are simply altering their effort accordingly.
3. Social interaction
The most consequential effects of incentives may not happen inside an individual’s head at all. They happen between people.
In one study, researchers looked at forced-distribution performance systems i.e. the practice of evaluating employees relative to one another. When participants performed a task individually, forced ranking increased their speed. But when work became collaborative, the results reversed. Not only did forced ranking slow down task completion, it also significantly reduced knowledge sharing.
Consider a scenario where two people are collaborating on a new product. If one person discovers an insight that could significantly enhance the other’s part of the project, passing that information along makes sense when the mutual outcomes are aligned.
However, if both people are competing for a single promotion, things get tricky. One study investigated this dynamic and found that strong promotion incentives were associated with greater individual effort but lower helping effort toward coworkers.
A conventional performance-management system may record the first effect but completely miss the second one. For creative work, that blind spot is more dangerous. Innovation is rarely the product of isolated brilliance. Someone supplies an analogy, challenges an assumption, shares a contact, offers technical knowledge, or spends an hour helping a colleague escape a dead end.
Competitive incentives can put a price on that generosity. And under stronger competitive conditions, the consequences can move beyond withholding help.
In one study researchers created experimental tournaments in which participants could improve their chances of winning through productive effort or through actions that reduced a competitor’s performance. As the difference between the winner’s and loser’s rewards increased, participants exerted more productive effort and more sabotage.
Most workplace sabotage isn’t very dramatic. It often looks more like a delayed reply, a useful insight kept private, or an idea presented as “mine” rather than “ours.” Individually, these decisions can be rational but collectively, they can destroy the culture needed to support creative work.
That is why incentive design is ultimately also relationship design. It tells employees whether a talented colleague is primarily a source of knowledge, a partner in discovery or a threat to their own reward.
The real question behind every incentive
The Maine officials who paid for seal noses made an understandable mistake. They could not directly purchase their real objective, so they created a measurable proxy.
More than a century later, organizations do the same thing with sales targets, KPIs, patent counts, performance ratings, promotion tournaments, publication metrics, and innovation bonuses.
The lesson is not that incentives are inherently corrosive. Incentives can increase effort, but they can also redirect effort, narrow attention and change colleagues into competitors.
So before attaching a reward to creative work, leaders should think carefully about these questions: What behavior will this incentive intensify? What will it cause people to pay attention to? And how will it affect collaboration? These questions shift incentive design from a compensation problem to a problem of organizational architecture.