I’ve always had a bit of a dilemma when it comes to incentives. Firstly and fundamentally as has been widely discussed elsewhere (See Dan Pink) do incentives actually accomplish the desired result, for anything more than repetitive tasks? (Scientifically shown not to) And secondly, when establishing an incentivised objective for someone, are you setting an incentive for the person to do their job, to do their job well (aren’t they paid a salary for that), or are incentives for going above and beyond ‘doing your job’? What incentivised objective would you set for an airline pilot – 100% safe arrival of passengers?
We all like to receive more money, a bonus, but I think a bonus is fundamentally different than setting an incentive that has an associated payment? I personally like the idea that the success of an organization is shared with those who contributed to that success in an equitable way, reflecting the value and significance of the individual or collective contribution. However I believe that organizations struggle with their incentive programs. I do wonder how fair and equitable incentives programs actually are within an organization? Which departments/teams achieve the highest pay-outs? Are these the same teams that contribute the greatest value? Are there any companies where the incentive process and payments that result are totally open and transparent, open to the scrutiny of everyone? Perhaps such transparency would uncover and invoke a sense of fairness, or then not!
In some roles, the measurements used for incentives are clear. Sales incentives most obviously, the sales targets are clear as are the actual sales and hence the rewards according to a known set of rules. I did work for a very successful company which didn’t have a sales incentive program, believing that sales people should not be encouraged to sell ‘things’ that the customer didn’t actually need, more of a trusted partner. When a sales incentive program was introduced, it failed (not alone) to turn around a faltering company, and the rumour was that it cost more to implement than it ever paid out! Do companies implement incentive programs and systems because others have them?
Outside of a work context: giving people monetary (or other) rewards (or threats) for them to ‘do as you say’ may be considered blackmail or at least a form of coercion! Would your employees do their job, and do their job well voluntarily, without the need of that incentive? Do incentive programs drive employee engagement, or do incentive programs amount to organizational bullying?
In my experience including incentive schemes within a Performance Management process leads to a significant skewing of the performance management process. The focus shifts to the incentivised part of the performance, the parts that will potentially earn an additional reward, and not on the overall contribution that someone has made to the organization. But this takes us back to one of my dilemmas – Should incentives be set for doing your job.
I wonder why organizations set up Individual incentives! This can divide an organization and inhibit the collective and collaborative culture and environment, especially when the goals and objectives of each individual are not known or poorly, or not aligned. In large complex and dynamic organizations it must be near impossible to maintain a coherent set of objectives. Is the effort of trying doing more damage than the value it is creating? I think I would focus on creating unifying objectives, that require (at least encourage) collaboration and cooperation for them to be accomplished? Perhaps organizations can learn from professional sports teams in this.
I liked the bonus program of my first employer (many years ago); it was simple, clear, open, and tied to the value (revenue) created. As a first time line manager it was easy to administer; I didn’t have to set objectives, no individual incentives and no complex and/or subjective criteria; the team understood what the work was, when a bonus would be achieved, for doing what, and how much it would be (2% of the revenue generated). They could even choose by themselves to hand-over the revenue generating work (and the bonus) to another team member – without any approvals from me. And performance reviews focus on how well you had done you job.
And to conclude: are incentives and incentive programs being used to coerce employees into to at least appearing to be working on activities and having objectives that support the organizations strategy? Aren’t there far more powerful ways of motivating employees?