Why do performance incentives so often lead to burnout?

The term burnout has become one of the most used words in modern working life. From toxic mangers, unclear expectations and unrealistic workloads, burnout is often used to blame for employees disengaging from work and quitting jobs.

According to research by Jean-Pierre Benoît, Professor of Economics at London Business School, burnout is often not a psychological failing or an unavoidable consequence of hard work. His research reveals that it can be a predictable, and sometimes even rational, outcome of how firms design incentives.

Jean-Pierre reframed burnout through an economist’s lens for The Why Podcast. Burnout is work-related stress that leaves people “worn out physically and emotionally”, often expressed through cynicism, detachment and a drop in performance. His findings add a crucial twist though – burnout is not simply something that happens to workers, it often develops by the very systems organisations put in place to motivate them.

How burnout develops

Jean-Pierre points out that burnout is not an on/off switch. “It’s basically an accumulation,” he explains, describing burnout as a continuum rather than a sudden collapse. Energy and enthusiasm are slowly depleted long before anyone formally “burns out”.

That distinction matters because it changes when, and how, organisations should respond. By the time an employee quits, performance collapses or sick leave spikes, the damage has already been done. “Something is happening along the way,” Jean-Pierre warns. The warning signs are gradual, but they are often overlooked.

Surveys suggest that as many as 95% of HR executives see burnout as a serious issue, linking it to absenteeism, disengagement and declining productivity. At the extreme end, burnout ends in turnover as workers quit or are pushed out once performance falls.

Turnover can be costly, as firms must recruit, hire and train replacements, often losing valuable institutional knowledge in the process. For workers, burnout can damage health, strain relationships and zap any joy and fulfilment from work. “Hopefully, you’re enjoying the workplace,” Jean-Pierre says, “and you’re not just viewing it as a big drain.”

How incentives quietly create burnout

Many roles, particularly in sales, finance and professional services, rely heavily on bonuses, commissions and performance targets to push people to “go the extra mile”. Jean-Pierre’s research does not argue against incentives necessarily but rather points out the problem when the incentives are too strong.

The key mechanism is what Jean-Pierre calls effort cost spillovers. Effort is not reset to zero at the end of each day. Working harder today makes working hard tomorrow more costly. “The spillover,” he explains, “depends on what I did yesterday.”

When incentives encourage sustained overwork, fatigue accumulates gradually. Employees may feel fine, even energised at first, but eventually, the costs catch up, productivity falls, motivation wanes, and burnout sets in, he explains.

When there is no ‘sweet spot’

This logic leads to one of the paper’s most uncomfortable conclusions: firms may not always be able to fine-tune incentives to avoid burnout. For example, Jean-Pierre explains, a salesperson paid a 30% commission may work relentlessly, deliver strong short-term results, and then burn out and quit. However, if the commission is reduced to 20%, this individual may just simply stop trying.

Managers often assume there must be a sweet spot in between. Jean-Pierre’s model shows that when spillovers are large enough, that middle ground may not exist at all. “The firm has just two choices,” he says: “30% and burnout, or 20% and they don’t work.”

Some organisations knowingly accept burnout and turnover as part of their business model, particularly where workers are young or easily replaced. Others find themselves trapped between underperformance and unsustainable intensity.

When employees do leave, managers often blame individuals rather than systems, and Jean-Pierre points to what psychologists call the fundamental attribution error: the tendency to explain outcomes by personal traits rather than structural causes. “They don’t ask themselves, ‘Are they quitting because of the incentive programme that I put in there’?”

This blind spot helps explain why firms continue to repeat the same mistakes. For example, short-term performance improves, bonuses are paid, and any later wave of resignations is treated as unrelated or inevitable.

Designing incentives that don’t exhaust people

What can firms do differently? One option is commitment by setting clear, credible incentive paths over time so experienced workers can regulate their own effort. If employees know what’s coming, they can pace themselves rather than sprinting toward burnout.

Another approach is to invest in wellbeing measures such as flexible hours, recovery time, health benefits, not just as perks, but as tools that reduce effort spillovers. By lowering tomorrow’s cost of effort, these measures can make incentives sustainable, says Jean-Pierre.

The real insight is not psychological but economic. Incentives do not merely reward effort, they structure it over time, but when they are misdesigned, they can extract performance at the cost of exhaustion ahead. Burnout, in this sense, is not an accident, it’s a predictable consequence of how organisations choose to motivate.