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What makes people tick?

When it comes to incentives designed to increase productivity, there seem to be 2 conventional views:

  • Incentivise staff with good pay package and success based bonus scheme
  • Incentivise staff with good pay package and pay rises, no need for success based bonus

Most managers will fall into one camp or the other without putting too much thought into it. Indeed, as economist John Kenneth Galbraith puts it: “The conventional view serves to protect us from the painful job of thinking”. But think is exactly what managers are supposed to do.

In my opinion, both views have their merits when applied in the correct circumstances. The problem is, because most decision makers have preconceived ideas of which view is correct, they impose their view on their organisation without examining underlying factors sufficiently. Therefore in reality, when used as the sole motivating factor both methods are as likely to fail as they are to succeed.

Furthermore, no matter which camp a decision maker falls into, they will all agree that either of these methods will always be more successful than not offering any financial reward at all in exchange for work provided. Sounds like a logical and compelling argument, right?

Wrong! To illustrate this, I shall provide an extreme example. Imagine you want to motivate a team to design and provide content for an online encyclopaedia. There are 2 ways to go:

  1. Apply traditional pay structure with or without bonus and pay a large team to put the encyclopaedia together
  2. Let anyone contribute and pay them nothing for their efforts

This really did happen and bizarrely, the second path was hugely successful and the first wasn’t. I am of course referring to MS Encarta and Wikipedia.

I am not for one minute suggesting that companies should stop paying or incentivising their employees, I am merely trying to illustrate that “conventional wisdom” is sometimes a contradiction in terms!  If it is possible in some rare situations that more success can be achieved without offering financial reward at all than by offering it, then surely it is possible or even probable that both the success-based and non-success-based camps are right depending on circumstances and execution.

Therefore, when choosing how to incentivise staff, companies must think very long and very hard – not just about what exactly they are incentivising, for example top or bottom line growth, but also which form of incentive will work best and why.

Also, whether you are planning to introduce a new incentive scheme in your company, or deliberately choosing not to, consider these points:

  • Some objectives are better achieved if additional financial reward is provided, others are not
  • It’s not just a case of incentive schemes possibly having no effect, they may even have a detrimental overall effect on your company, so it is possible that the company will be worse off after introduction of the scheme than before
  • Incentive schemes can have a varying effect on achieving an objective, depending on how the objective is presented! So the same incentive scheme will result in different levels of success in achieving a given objective if the objective is presented differently
  • Offering exactly the same reward for exactly the same work will have different results depending on what yardstick the recipient is using to evaluate the reward

Sounds complex? Well, it is! Which is presumably why incentive schemes generally have little or no real effect as a motivational tool.

Obviously companies must have some sort of financial remuneration structure in place; the question is how to structure this in such a way that it truly motivates staff to achieve company objectives.



First appeared in Vashi Times Jobs & Career on June 25th, 2011

Categories: Uncategorized
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