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Incentives and Rewards

Written by: John Niland

Article Overview: There are two phrases that always make my heart sink. The first of these is "appraisal system". And the second is "incentives plan," "bonus structure", call it what you will. Needless to say, these two subjects are closely related cousins. Underpinning both is the "carrot and stick" approach to motivation; a school of inspiration which has its origins in the management of donkeys.

Incentives and Rewards

Why do people come to work?



For over a decade, I have been studying what motivates people at work. And I have been frequently mistaken in my conclusions. For example, there was a time that I thought that a harmonious atmosphere in the office - where everyone was singing from the same proverbial hymn sheet - was a vital ingredient of good management.



How wrong I was. Once the hymn sheets get too "same-ish", some people get bored and give up singing. One person's harmony is someone else's tedium.



Re-examining assumptions



Whenever something looks like commonsense, the more we gain by probing it. Like appraisal-systems, the merits of incentives and rewards are often unquestioned; we simply look for the best system possible.



And there are no shortage of advisers and advocates for every possible combination. So we equip ourselves with another variety of carrot and stick, instead of questioning whether we wanted donkeys in the first place.



Enjoying the job


So why do people come to work? If there is one factor that occurs time and time again, is can be summed up in the word enjoyment.



It's self-evident when we think about it: surely the most sustainable reason why we ourselves come to work, try harder, endure setbacks, tolerate difficult people and put in extra effort to solve problems ... is that we relish the challenge.



Punished by Rewards



In his book "Punished by Rewards" Alfie Kohn outlines an impressive body of research that supports the view that "extrinsic" motivators (like incentives, bonuses, award-ceremonies) destroy "intrinsic" motivators (like interest in the job, relish of the challenge, and enjoyment of the task).



For example, when two groups of children are allowed to play with the same toys, and one group are rewarded for what they do, the group that is not rewarded not only make more creative use of the toys, they go on playing with them for longer. The rewarded group quickly get distracted into squabbling over the rewards.



Sounds familiar?



Nor does it stop at school. Alan S Blinder, a Princeton University economist, has edited a research anthology whose findings can be summarise on one sentence "Changing the way workers are treated boosts productivity more than changing the way they are paid".



Why do rewards not work?



There are many reasons cited in Kohn's research, but here are the top four:


Rewards rupture relationships . Incentive programs reduce cooperation, particularly if team-members are ranked against each other. Even where groups are rewarded on the basis of team-effort, people are less likely to challenge poor decisions, or to reveal problems they are having, with a boss who decides what goodies they will get next.

Rewards ignore reasons. Holding out a carrot is an easy pseudo-solution; it takes more effort to get to the bottom of what is de-motivating or damaging productivity. Pay-for-performance tends to displace careful management, which is more about providing useful feedback in a way that is respectful and meets the needs of social support.

Rewards discourage risk - taking . Getting people to chase money produces nothing except people chasing money. Employees will do what is necessary to score on the evaluation form rather than what is genuinely needed to do the job correctly. Creativity invariably suffers.

Rewards undermine interest . According to Kohn, this is the most compelling reason. Incentives distract from work-enjoyment. Work becomes perceived as the price to be paid (and a punishing price at that) for the rewards and the goodies that the job brings.
Resistance



When I discuss these findings with leaders, I am often taken-aback by the resistance that shows up. Sometimes, this takes the form of anger, which generally means that some very sensitive buttons are being pushed. Why?


Sometimes, a lot of work has gone into the incentives scheme. Nobody appreciates being told that the foundation might be flawed.

Along the way, managers may well have publicly championed performance-related pay, and had a tough time getting it approved.

And there are many consultants, advisors and HR specialists making money out of incentive-schemes. Nuff said!

My own observation is that many leaders want a world in which people can be controlled. When they hand out the carrot and stick, it reinforces their own belief that they are in charge. And if the incentive-scheme is not working, it is easier to believe that there is something wrong with the incentive-scheme than it is to imagine that there might be a more fundamental issue to deal with.



A deeper understanding of motivation



If we go back to the question of why people come to work, we can begin to formulate a more sustainable basis for motivation. Borrowing a model from Ken Wilbur, we might express this as follows:






Interior Exterior
Individual Love of problem-solving

Intellectual challenge

Creative expression
Achievement

Learning and Challenge,

(and Yes, the Money!)

Relationships with others Working together

Recognition, appreciation

Sense of fun
Collaboration, Feedback

Brainstorming, Cooperation

Creating new strategies






The problem with incentives is that they only deal with the top-right quadrant of motivation. And in doing so, they corrode the other quadrants.





The alternatives



The hard part of this section is that there is not any one alternative. Indeed, the very simplicity of incentives goes a long way to explaining their popularity. Nevertheless, here are a few practical guidelines: feel free to call or email for those that would be of most value in your specific situation.




Let's first summarise the alternatives in terms of the grid we saw above:




Interior Exterior
Individual Practice appreciation (v. evaluation or even praise).
Ensure everyone has a job that has meaning and makes a difference.

Add opportunities for variety and autonomy.

Relationships with others Work on common vision

with (not for) the team.

Create a culture where

evaluation is used carefully and respectfully.
Make systems more reliable.

Look for strategies to make sales & marketing easier and more enjoyable.

Re-appraise appraisals!





A few words about each of these:

Practicing appreciation is the subject a separate paper - see the index of articles, or email john@success121.com In a nutshell, the crucial distinction here is the difference between praise and appreciation. The former comes across as controlling and paternalistic, the latter promotes confidence and growth.

Working on a common vision with (v. for) a team is one of the ways in which co-operation is fostered, and people feel included. Nor is there any big problem in communicating a vision that people have played a part in creating themselves. For more on this subject, email john@success121.com

In a culture where evaluation is used carefully and respectfully, the chances are that a lot of work has been done to remove spurious judgements from both formal and informal conversations. This requires a genuine in-depth look at how we communicate with each other in everyday situations. See article "Re-evaluating evaluation" or email john@success121.com This removes a lot of internal irritation and resentment, promotes security and creativity and really transforms the culture of a team.

In order to make sure that everyone has a meaningful job, we have to examine how much autonomy they have, how much variety they enjoy and how much learning they are allowed to do. It is true that each person has different requirements here, and it is also true that these requirements evolve over time. This is the real task of managers ... not the evaluation of people!

Making systems more reliable would probably do more to improve morale in many workplaces than all the appraisals and incentives that anyone could every imagine. The frustration and delay that accompanies failed IT, broken air-conditioning, wrong room temperature, etc, not only damages motivation, but also damages relationships between colleagues. When these things are not attended to, they positively scream that the management does not care.

The hussle of getting the next client or the next project is a real heart-sink for many professionals. Building "new business" expectations into their targets and incentives is a far too easy answer. Alas, this rarely works, and when it does the results are short-lived. For some practical measures to improve these strategies and make them more enjoyable, see the Marketing and Sales section of this resource-library.

By re-appraising appraisals , we will be doing much to enhance the lives not only of employees, but of the managers who have to do them. Appraisals are often difficult for both parties and easy to postpone. The reasons for this are covered more fully in " Re-evaluating Evaluation" ; in a nutshell, these rituals are overly judgemental, create resentment, rarely achieve anything, are generally dreaded and fail to inspire.
Few of us want to attract donkeys, so it's probably time to abandon the "carrot-and-stick" approach to motivation. There are better ways that encourage collaboration, provide essential feedback and promote a sustainable culture.



Further information



© John Niland, Success 121, May 2008. May be reproduced on condition that the "Further Information" section above is included.

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Article Tags: advocates, appraisal systems, assumptions, award ceremonies, carrot, conclusions, good management, harmonious atmosphere, harmony, hymn sheets, impressive body, incentives, intrinsic motivators, kohn, merits, rewards, setbacks, tedium, vital ingredient, what motivates people



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