Common wisdom would argue that by positively reinforcing the desired actions of an employee through rewards such as bonuses, firms would be able to extrinsically motivate their employees into constantly maintaining such behavior. However, a common, and sometimes fatal mistake is rewarding A while hoping for B. A prime example of this would be the 2008 economic recession.
As banks began allocating bonuses to employees who were able to sell the most mortgages, in hindsight, it should come as no surprise that these bankers began giving out loans with inflated ratings. In fact, the situation reached the extent to which individuals who had long been deceased were being given loans. Safe to assume, such loans were never going to be paid back.
So, how can such situations be avoided? Well, firstly, it would be wise to remember that business is about disincentives as much as it is about incentives. To avoid such a mess in the future, I support the notion that bonuses and other incentives that may lead to destructive behaviour come with the added clause that one may not only lose his bonus, but also be docked pay if certain negative circumstances were to arise. Thus hopefully eliminating the probability of any incentive fueled destructive behaviour.
Article Link: http://www.conservapedia.com/Financial_Crisis_of_2008