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How to Keep Incentives Attractive
October 22, 2008
One of my favorite lines coming out of this season’s political debates is “Let me be very clear about this.” So, let me be very clear about incentives. Many incentives become entitlements very quickly. Once the incentive shifts to an entitlement, it is done: game, set, and match.
Incentives are usually positive inducements to encourage a higher level of performance. We think of them as carrot and stick, or as a “quid pro quo,” that lets people know that, if you do something, you get something. Carrot and Stick incentive programs work well IF the stick isn’t too long, the carrot is big enough, and people are hungry.
When cash-based incentive programs are put together and introduced to the participants, owners and managers often believe that there should be no cap on the potential earnings for those participating in the program. Oddly enough, the more successful the incentive program is at “producing” the desired results, the more likely an earnings cap will ultimately be imposed or that the entry level will be raised.
Why? Because somewhere deep down inside, we begin to think that the participants did “too well and got more (money) out of the program than we really intended or than they actually deserved.” Then what happens? Well, in the minds of most participants, the stick just too long, the carrot too small, and their appetite shrank.
In most cases, that particular incentive will never work quite as well again. Equally important, the owners/managers responsible for the plan take a huge credibility hit. A large portion of the power of (outside) incentive programs is driven by trust. Those programs are a lot like Humpty Dumpty. Once broken, all the king’s horses and all the king’s men can’t put him back together.
Money Motivates
There is a popular notion among the soft-side organizational theorists that money is not a motivator. In fact, money is a powerful motivator. It is not necessarily, however, a satisfier. In fact, it is often a dissatisfier, especially in the circumstances described above. That means its long term power as a culture changer has a very short shelf life.
To make the most of cash based incentive systems, follow these principles:
- Clearly communicate expectations, rewards, and probability of program mutations based on ROI.
- Engage participants in establishing reachable goals and payout levels.
- Utilize graduated payouts based on performance levels.
- Keep the program penalty-free for exceptional performance.
Most of us find incentive programs like this to be motivational, at least in the beginning. Remember that people have an inner sense of “fairness” that functions like a Geiger Counter. It only clicks when there is some uranium around.
Posted by Dan Schneider on October 22, 2008 | Comments (0)
