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To Incentivize, or Not to Incentivize, That is the Question …

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  Dr James Cummings

 

 

 

 

A couple of nights ago my wife, myself, and a small group of her co-workers went out to dinner. As inevitably happens, the discussion went from “how about this weather?” to “can you believe what’s going on at work?” Since I was the only person present NOT working for the same employer, I sat quietly and listened. A person can learn a lot about a business by listening to the employees.

While I learned a lot of things that night, there was one specific topic that seemed to garner much of the time, attention, and emotion of the group. That topic? Rewards to increase performance.

The idea of providing incentives to increase employee productivity is not new – not by any stretch of the imagination. However, what is new is our understanding of the science behind rewards. For an excellent reading on this subject, check out Daniel Pink’s book, Drive. His work tells about the science of what works. What he points out is that there is a serious disconnection between what we know works and what organizations actually implement. Stated differently: a large number of employers are trying to use a reward or incentive program that simply doesn’t work. And, in those cases, the employees know it. When your employees see you trying to apply something that you do not fully understand, it hurts your credibility, and it contributes to employee unhappiness. This was precisely the topic of dinner conversation.

So here is a synopsis of the model: rewards can have a profound positive impact on work that is more rote in nature – work that requires repetitive tasks or work that is more basic in nature. Providing rewards in this instance often results in increased productivity. That makes sense, right? We are taught as children that rewarded behavior is desired behavior. So it is easy to see how an employer would cast company-wide incentive programs targeting pay (or reward)-for-performance.

However, research has consistently demonstrated that providing rewards to employees who engage in tasks that are more dynamic and/or sophisticated in their completion actually HURTS their performance. Why?

One theory suggests that the dangling of a reward in front of an employee for a sophisticated project or task actually provides distraction, thereby limiting the overall quality of the work – reminding us that we really don’t multi-task well. This group works best without psychological distraction, as those energies are focused on solving a complex challenge.

So what does work?

What works is understanding the nature of the work your employees do, and then engaging with them on their level.

If you have employees that work on an assembly line, they are likely to appreciate and enjoy an incentive program. If you have a team of inventors who are constantly thinking outside the box, a pay-for-performance model is unlikely to impact their performance.

For the more sophisticated employee or group of employees, what works is giving them permission to be as creative as they can be – not limiting them with rules, regulations, and incentives. The best incentives for this type of person or team involves letting them have a say in what is going on, what projects they are a part of, what the outcomes will be, deliverables, etc.

Here are a couple of questions you can use to gauge the role of incentives in your business:

  1. What product or service does my business actually deliver? Always good to be clear on this, but knowing for sure is the foundation of this strategy.
  2. How is that product or service developed?       Knowing the process that is required is necessary because it defines the nature of the work, helping to categorize it, which then informs you as to what type of incentives to use or avoid.
  3. How much creativity is needed to do the job of my employees? Assessing the required creativity further informs your understanding of the type of work sophistication required.
  4. If I decide to apply incentives, can I do it across work groups or types of employees? Be careful here! Avoid rewarding team A and ignoring team B – your actions set the tone for the culture.

Breaking down incentives to enhance our understanding of them is part of the developmental process that all business owners need to complete and master.   Applying what we learn from our understanding is the next step before a paradigm-shift occurs in your business! Happy employees and growing bottom lines agree.

 

Dr. James Cummings is a Private Platinum Facilitator at Tap the Potential LLC, America’s Leading Rural Business Growers.

James specializes in applying the best practices from the social sciences to solving complex rural business challenges. James holds a Bachelors in Social Work from the University of Wyoming and earned his Doctorate of Psychology in Organizational Leadership & Development from the University of the Rockies. Access our comprehensive video training 5 Secrets to Exceptional Employee Performance (our gift to you!) at www.tapthepotential.com

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