Three Connections to Meaningful Rewards

Too often debates about financial incentives seem to hang on a false choice: either we help people see and embrace the purpose and meaning of their work or we provide them with cash rewards for getting things done.  As if these things are mutually exclusive.

Shouldn't we be doing both? 

Shouldn't we be putting programs and practices in place that make work rewarding both emotionally and financially?  In fact, our research and experience tell us that cash rewards work best when they are paired with efforts to help people understand the meaning and the value of what we are asking them to do. 

To this point, a recent Knowledge@Wharton article (Putting a Face to a Name: The Art of Motivating Employees) featured some of the research Wharton professor Adam Grant has done in the area of motivating workers.  Adams describes a number of studies demonstrating that efforts to emphasize "task significance", the impact that your job has on others - can measurably impact performance and productivity. 

We should already know this, but our efforts to design financial incentives often suggest that we don't. 

Variable pay is becoming an increasingly prominent piece of the pay puzzle for most workers.  This fact ups the ante on how we do incentive compensation.  To make incentives work well, to ensure they deliver on their promise for workers and employers in this environment of growing pay risk, I think there are three essential connections which we must make.

(1) The Meaning Connection.  We all gain from better understanding how our work benefits others, whether those others be external customers or internal peers whose own work and ability to serve customers hinges on our jobs being done well.  Astute leaders and front-line managers will find ways to make this connection for employees - because it is a good end in itself and because creates a strong foundation for our other efforts to influence and reward performance.  In an era of increased pay risk, I think this also creates an important platform for sharing the economic upsides and downside of work.

(2) The Value Creation Connection.  Employees must understand how what they do each day influences the most important business priorities of their employer ... and the key metrics upon which their variable pay rests.  (Hopefully these things are closely and clearly related.)  They need to appreciate their role in creating economic value - the value that allows the organization to survive and thrive.  Yes, this takes work - but if we expect employees to accept more performance risk in their compensation package, they need to be empowered with an understanding of how they can make a real difference.

(3) The Reward Connection.  To buy into and place their faith in an incentive plan - particularly in this new age of increased compensation risk - employees must understand its mechanics.  They must be able to see how moving the needle on the plan measures will translate into an award.  Discretionary awards must be minimized; leaving awards up to managerial discretion puts a question mark where this last connection should be, a situation that will be less and less acceptable in an age of greater pay risk. 

And so, I think influencing employee performance isn't about meaning or rewards, but rather strong connections between meaning and rewards.

You?

Comments

[E. James (Jim) Brennan]

As long as bean-counters can't monetize the value of performer contributions, the power of intrinsic motivations and neither the cost nor the benefits of psychological reinforcement, we will continue to have these problems. Programs that are long on objective financial metrics tend to be short on subjective motivational power; that's quite troublesome, because all motivations are essentially unique to each person. What drives improvement in one won't automatically work for another, and that is the complexity challenge to creating universally effective programs.

[JD]

Ann,

You're echoing the thinking of Dan Pink. Have you read his book, Drive?

JD

[Derek Irvine, Globoforce]

The Knowledge@Wharton article is terrific and I encourage everyone to read it in full. The line that struck me most powerfully:

“Employees who know how their work has a meaningful, positive impact on others are not just happier than those who don’t; they are vastly more productive, too.”

All employees want is to know that what they do matters, that THEY matter. And they want to be told that personally. Overcoming the barriers to interpersonal relationships created by our highly technological workforce is a challenge, as noted by Mr. Grant. This IS where strategic employee recognition plays a fundamental role by encouraging frequent, personal acknowledgment and appreciation of employee effort in a highly specific and meaningful way. This goes beyond a simple, "Thanks. Great work." to say instead: "Joe, I really appreciate the way you tackled XYZ problem. Not only did you help me get my job done more easily, but you demonstrated true integrity in how you handled a tricky situation and in the process contributed to us achieving our 25% customer satisfaction improvement goal."

Now that kind of personal, specific, meaningful recognition can powerfully impact the entire culture of an organization. Read more on how herehttp://bit.ly/2JEkqA

[Paul Hebert]

Interestingly - as I read the comments that you are echoing Pink's Drive "stuff" - I read it completely different.

What I hear you saying is that yes - meaning and connection to our work drives performance and that properly designed incentives/recognition can help illuminate that connection.

Drive/Pink took the position that incentives don't work and decrease performance (and I would agree when they are poorly designed and focus solely on outcomes) - but your post highlights that fact that when focused on appropriate behaviors and metrics they can create a more solid connection to the employee's "place in the world" which will reinforce their purpose and provide a way to measure their progress (another huge motivational lever.)

[Ann Bares]

Jim:

Yes - see your point. Ultimately, our reward programs must integrate psychological & financial, intrinsic & extrinsic to really deliver - but there's no denying the challenge there.

JD:

Huh. I meant to offer an alternative view to Pink's/Drive's, rather than echo him. See Paul's (who always says what I mean to say better than I actually can) comments below. Also, if you don't already read it, I'd encourage you to go to Paul's blog and see his review of Drive.

Derek:

Agree - the Wharton article is great. I particularly appreciate that they offer specific situations and data to back up the point. Thanks for sharing the thoughts and the link.

Paul:

Thanks, as always, for making my point better than I can!

All - appreciate your observations and comments!

[YourCoach]

I actually agree that combining rewards and practices for intrinsic motivation can go together. As long as any reward given is personalised and measured against a clear rule for success that depends on the specific content of that person's job. That does take some time to set up.

Like you say Paul, incentives that are poorly designed and focus solely on outcomes can work counterproductively - you can also find reference to this in Stacey Adams' equity theory.

When someone perceives a colleague's reward as being unjustified, they can become resentful and demotivated. So it's important that rewards are set against clear measures that can be verified and personalised.

Maybe you could say that as personal follow-up, feedback and the meaningfulness of one's work increases, the need for financial or other compensation decreases?