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Three reasons why bonus programs might not pay off in law departments

Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management (Harvard Bus. School Press 2006) at 125-127 explains why bonus programs can cause dissatisfaction in law departments. The co-authors give three reasons, which reinforce each other: self-enhancement effects, under-funding, and social relations.

The self-enhancement effect involves the commonplace that most people believe they are far above average. If a bonus disabuses the lawyer of that inflated self-image, the manager who awards it is met with disbelief, resistance, and anger.

Funding undermines the presumed effectiveness of incentive bonuses because most companies don’t put enough in the bonus pool to make significantly bigger awards to those who performed well. If the pool is too shallow, the awards from it can’t differentiate one lawyer’s performance sufficiently from another lawyer’s.

Third, law departments are a team, or are supposed to be, so to single someone out for special monetary recognition creates tensions and dissatisfaction. As the authors put it, “Differential rewards drive people apart, sorting them into categories as ‘winners,’ ‘nothing special,’ and ‘losers.’ The result in a law department can be jealousy and resentment.

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