The Truth About Incentives
Imagine the scene – you’re in a meeting discussing how to get better performance from your workgroup, sports team or employees…. AGAIN. You’ve tried recruiting over priced ‘talent’ and you’ve invested in training interventions but both are expensive and neither lives up to the promise.
What about incentives? Some funky innovation fund or new structured bonus scheme is bound to get everyone’s productivity juices flowing – right? Actually no, in fact, most incentives don’t work.
For a start incentives such as bonuses are backwards looking and effectively close out an obligation. They are perceived as a reward for work already done so the reward – should it come – closes out their obligation for high performance in the future. Bonuses don’t always drive forward positive behaviour – especially when the expected reward doesn’t materialise, is not as much as expected or is not considered ‘fair’. But what’s ‘fair’? The assessment of ‘fairness’ is totally owned by the individual and therefore totally outside your control. Unfortunately, most people overestimate what they contributed to an outcome and will almost always end up feeling short-changed and of course, disappointed individual’s tend not to be very engaged or productive moving forward.
Incentives only work for certain types of work
The key to using incentives successfully is knowing the difference between what behavioural scientists call ‘algorithmic’ and ‘heuristic’ tasks. Algorithmic tasks are those things that are routine and follow a set path to a set conclusion. Algorithmic tasks were very popular in the Industrial Revolution where most people in the workforce did one specific, routine job. Manufacturers that operate an assembly line employ individuals who carry out algorithmic tasks as the product nudges toward completion. If you want to motivate people to do algorithmic tasks which are often monotonous and boring then reward and punishment will work very effectively.
Heuristic tasks, however, are very different. They are tasks where the outcome can be reached in a number of different ways, where the individual needs to experiment for best results and may have to come up with something new. If you want to motivate people to do heuristic tasks which involve using their brain, personal experience and common sense then reward and punishment will NOT work. In fact, according to renowned psychologist Edward Deci and two colleagues who went back over 30 years of research assessing 128 experiments on motivation, “tangible rewards tend to have a substantially negative effect on intrinsic motivation.” In fact, the long-term damage caused by offering short-term rewards is one of the most robustly proven findings in social science.
Science has demonstrated beyond doubt that rewards can:
Reduce motivation by turning something enjoyable into a chore
Foster bad behaviour
Inhibit good behaviour
Cost the business more and more to maintain results
We live is a volatile, uncertain, complex and ambiguous (VUCA) world. That world requires heuristic ability not algorithmic ability. It’s estimated that 70 percent of job growth will come from heuristic work which does not respond to reward and punishment. So forget about bonuses and lofty incentive schemes. They are expensive and often counterproductive.
Instead, focus on ‘fit’.
Fit: Amplify ‘Brightside’, minimise ‘Darkside’ and understand ‘Inside’
When we understand personality and embrace its impact on performance from the boardroom to the locker room we can unlock our own and other people’s real potential. When we appreciate how we do what we do, why we do what we do and how we manage to mess things up when under pressure we can put ourselves in a role that amplifies our natural ‘brightside’ while mitigating our innate ‘darkside’ because we finally understand what’s driving us from the ‘inside’.
When everyone in a team or business appreciates ‘fit’ and are in the right role and the right environment that honours their unique gifts, outlook and values then we are all much more likely to be productive, creative and happy because we are doing what we would do naturally if left to our own devices. Armed with those insights we can consciously and successfully orchestrate ‘fit’ for ourselves and our people for optimal long-term performance.