Can Incentives Rise Above the Bad Rap?

I had the chance yesterday to collaborate with my friends at Halogen Software and put on a webinar Will Incentives Perform For You? about figuring the fit and feasibility of financial incentives.  I really enjoyed the session and wanted to share a couple of thoughts from it here today.

Financial incentives have been getting a bad rap lately; much of it - unfortunately - deserved.  Let's face it: Many of the claims about the negative consequences of financial rewards are, if you'll forgive the pun, on the money.  My experience has taught me that incentives - despite the minefield that apparently surrounds them - can be a powerful force for the positive in an organization, but it takes discipline and sound process to make that happen ... things that can be tough to come by in our hurry-up, I-needed-it-yesterday world.

Effective incentive plans:

1. Are thoughtfully conceived and carefully implemented.
2. Acknowledge the place of rewards as part of the overall system in which performance must be improved.

I believe that figuring out whether incentives will perform for you essentially comes down to asking and answering a couple of key questions:

Question 1:  To what extent is the performance challenge a reward problem?  (Which means drilling down to discover the real obstacles to the desired performance and determining which are likely to be positively impacted by rewards and which must be addressed in other ways.)

Question 2:   If rewards are part of the answer, are incentives the best choice?  (Remember that you have other reward levers - such as recognition or premium pay opportunities - to consider)

This means that incentive plan development - done right - does not begin by sitting down at a conference room table and sketching out design ideas on the white board.  It begins with information gathering - what we consultants like to call "discovery".  Discovery is the process by which you go around asking the key questions highlighted above and collect the information necessary to answer them.

The secrets to a successful discovery effort?  I think they are:

1. A great list of questions, which of course requires that you learn and reflect on the situation a little in advance.
2. A strong sense of curiosity and the will to let it lead you forward.  Be gracious and professional, yes, but also be willing to push until you get the information you need.
3. A bit of political savvy.  More on this below.

This third point is important because not every "customer" who asks for an incentive plan is willing to sit still for a feasibility study.  They want what they want.  In these cases, I simply position the discovery step as the first part of designing their plan - which, of course, it is.  Then, if I encounter ringing bells and warning lights along the information gathering path, I bring the results back to them.  Not as an adversary trying to rain on their incentive parade, but as a business partner trying to help them accomplish their objectives.  Sometimes a delicate dance, yes.

A few of my thoughts.  What tips and tricks can you share on figuring the feasibility of incentives?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Comments

[E. James (Jim) Brennan]

"Discovery" truly is a less problematic term than my favorite ("diagnosis"). The former sounds like simple preliminary information-gathering rather than investigating the true cause of the dissonance that prompted the request for an incentive system. Running a systematic diagnosis before making a prescription (logical but thus rare in management practice) is a potential challenge to the pre-announced desired solution decreed by the client. (Cough, cough.) Those of us who are attorneys, BCFEs and testifying experts are quite familiar with the discovery process applied in court cases. It sounds less confrontational than openly questioning the conclusion reached by some high executive Who Must Be Obeyed.

I always did a Compensation Audit first. Others might find guidance by searching under "Mager & Pipe Performance Model" for the superb classic summary. Most frequently, the issue to be resolved through the proposed incentives was not a reinforcement problem and superior alternative solutions were available. But, as covered in the old "First You Eliminate Pay as the Solution" article in August of 2010 here in the Cafe, managers are conditioned to throw money at every issue; it generally requires some careful maneuvering to help them discover that they really want you to do something different from their hasty initial first thought. As long as they believe the true best solution was their idea, everything will be fine.

Incentives are vehicles which, at best, stimulate action. Whether they are appropriate or whether the resulting action is desired are different things altogether.

[Connie Costigan]

Hi Ann - great post and thanks for collaborating with us on such a fantastic webcast. I think the archive is up on HR.com now for any of your readers who missed it!http://www.hr.com/en/webcasts_events/webcasts/archived_webcasts_and_podcasts/will-incentives-perform-for-you_gtrna82l.html

Connie

[Ann Bares]

Jim:

(I see Typepad ate my first response here.) Think you're right - discovery is probably a less threatening term than diagnosis, particularly to the manager who believes they already know what they want.

And yes, if the evidence against incentives as the (or at least the "sole") solution is compelling enough, hopefully your role becomes one of helping them "discover" that along with you.

Connie:

It was great to have the chance to collaborate with you - and thanks for sharing the archive link here.

[Tony Delaney]

Ann
The following blog was posted on the Brownie Points web site recently. I think it endorses much of what you said.......

Staff reward and recognition programs should deliver a clearly measurable result to your bottom line while inspiring, motivating and engaging your staff. Increasing staff loyalty, reducing staff turnover, improving customer service or increasing sales can lead to major improvements in your business, and your staff should share in those rewards.

Employee reward programs don’t have to be expensive, they just need to deliver an effective way to re-engage your staff, improve morale or maximise productivity. The improvement to your business should more than cover the financial cost of any well planned and implemented reward and recognition program.

In order to maximise the improvement to your business, behaviours that can be identified and measured should be built into the program. This will deliver key information to allow management to monitor and refine the program.

"69% cent of workers surveyed say that non-monetary forms of recognition provide the best motivation." The Gallup Organisation

Importantly, when deciding on the rewards that you plan to offer your staff, remember that different generations are excited by different things, so find out what will best motivate them. A unique “experience” will leave a longer lasting impression with the recipient than cash, which may just pay some bills. In addition, a truly inspiring experience will be talked about with colleagues, friends and relatives, driving the desire to attain further rewards. With a well implemented recognition program the cost of the rewards should be a fraction of the perceived value to the recipient.

Brownie Points has been designed to take the complexity out of reward and recognition. With fast implementation and personalisation, Brownie Points programs are intuitive and exciting to use, while delivering a significant return on investment.

To learn more, call the Brownie Points team today on +61 (0)3 9909 7411 or email us at [email protected]