According to Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management (Harvard Bus. School Press 2006) at 128, the extrinsic incentives bias is the “tendency to over-estimate how much employees care about extrinsic job features such as pay and to underestimate how much employees are motivated by intrinsic job features like being able to make decisions and have meaningful work.” For corporate lawyers, titles and the layout of offices are extrinsic job features, while challenging work, autonomy, and professional growth are intrinsic (See my post of Feb. 16, 2007on Maslow’s hierarchy of needs.).
As to one particular form of extrinsic incentive – bonus awards – Pfeffer and Sutton come down hard. “[W]hen work settings require even modest interdependence and cooperation, as most do, dispersed rewards [differential bonus awards] have consistently negative consequences on organizations,” (See my post of Jan. 15, 2007 on three pernicious effects of bonuses.).