One of the problems with research studies is the tendency of some leaders to see the headline and skip the actual study, especially when the sound bite version of the study’s conclusion supports the leader’s views.

So it was with dismay that I read about a study conducted by the University of Nottingham’s School of Economics. The sound bite to which a lot of leaders will undoubtedly be pointing is, “Penalties for slacking improve productivity more than bonuses.” Another sound bite sure to lead to some very bad business decisions: “Bonuses actually encourage employees to be less productive.”

The study, reported on the University’s website, was actually more of an experiment. I’m not a research expert, but putting 100 volunteers through this exercise doesn’t strike me as a scientifically valid approach to reaching a conclusion. Whether it’s valid or not doesn’t really matter, since the result of the experiment, when well understood, shouldn’t serve as fodder for rejecting the idea that employers need to put more trust in their workers.

The 100 volunteers were divided into “employers” and “workers,” then paired for several rounds of an “inspection game.” Workers had to decide whether they were going to make a “high” or “low” effort while the employers had to decide whether to inspect the workers’ efforts. In some instances, workers were paid a bonus for doing good work when the boss checked on them. Other times, they were fined for less-than-satisfactory work.

According to Dr. Daniele Nosenzo, the study’s co-author:

We found paying bonuses didn’t encourage more effort. Employers tended to reduce the frequency of their inspections when they knew they would have to pay a bonus for high effort.

This has a negative impact on encouraging working, which offsets any positive effect of bonuses. In fact, our subjects shirked slightly more often when bonuses were present. On the other hand, introducing harsher fines encouraged working. Shirking almost halved relative to a scenario without bonuses or fines. So it’s fines, not bonuses, that enhance efficiency.

It’s hard to know where to begin with the problems with applying this 100-peson experiment to a real-world workplace. To begin with, I’m aware of few (if any) companies that pay employees bonuses based on what inspectors see when they drop in for an unannounced visit. Bonuses are year-end benefits paid based on a formula when the company meets a threshold target or when an employee meets or exceeds expectations the boss notes in the worker’s annual objectives.

(Interstingly, the study was undertaken because of the outrageous bonuses some bankers in the UK receive. You have to wonder how many of their bonuses are tied to snap inspections.)

But it’s even more important to note that money is not one of the leading motivators of employee commitment, engagement or productivity. The 2007-2008 Towers Watson Global Workforce Study (PDF) found that pay was not listed among the top 10 drivers of employee engagement and retention, unless you count the finding that employees expect compensation to be fair compared to others doing similar work.

Far more important are factors like knowing the company has a great reputation, knowing the skills required for advancement, the availability of useful training, working for an organization that encourages creative thinking and being able to set limits on work hours without adversely affecting the organization.

Other studies have shown the importance of recognition.

All of which is important to note as some employers (you know who they are if you work for one of them) are reading about the Nottingham study and saying, “I knew it. The hell with rewarding people. If we can just keep ‘em terrified that they’ll be docked for slacking off, they’ll work their asses off.”

That’s no way to build engagement, that state employees reach when they’re ready and willing to make discretionary effort on their employers’ behalf. These days, with employees engaged in conversations in online social channels with a variety of communities, those who are engaged are far more likely to support organizational goals and initiatives in those conversations. Those who live in fear of surprise inspections that could result in penalties are more likely to complain online—and recent decisions suggest that companies are overstepping their bounds if they try to prohibit such complaints.

Certainly there are some jobs where penalties for underperformance are warranted. Ultimately, though, it still pays to build bonds of trust and commitment among employees, since they increasingly represent the front line of customer and public relations.