some understanding about the ways that incentives work in different settings or for different people. In the rest of this section, we discuss five different types of complexity that have been analyzed and the important considerations they raise for the design of incentives in education:

1.   finding performance measures,

2.   the different effects of incentives on different people,

3.   the effects of uncertainty and control,

4.   the effects of working in groups, and

5.   weighing the benefits of incentives against their costs.

Finding Performance Measures to Use with Incentives

In most jobs, the value of the work performed by each worker is difficult to assess. For example, for many jobs, it is hard to measure what workers produce because their output cannot be counted in any meaningful way. The qualitative aspects of that work—the relationship with the client, the clarity of the report, the accuracy of the numbers—are more important in determining its value than such countable outcomes as the number of meetings held, pages written, or spreadsheets produced.

The difficulty in measuring the true results of what workers do is an important constraint in providing incentives—and the difference between the available measures of workers’ output and the true value of that output has consequences for the way incentives operate. In an attempt to provide appropriate incentives, organizations often look for performance measures to use in objectively quantifying what each worker is producing. The problem is that these performance measures necessarily focus on the aspects of the job that can be easily quantified and neglect the qualitative aspects of the job that cannot be easily quantified. When incentives are attached to these performance measures, the predictable result is that workers often focus on the readily quantifiable aspects of the job that affect the performance measures and neglect the quantitative and qualitative aspects of the job that do not factor into the performance measures.

There are numerous examples of the distortion that results from the use of incentives with performance measures that do not adequately reflect the true value of the work that is being done. These examples confirm the findings in the theoretical analyses about the problems that can result when incentives are attached to performance measures that are not closely aligned with the true value of the work. For example, computer programmers rewarded by the length of their programs write longer programs, surgeons penalized for high mortality rates take less risky cases, and chief executive officers (CEOs) rewarded for their company’s earn-

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