WHY YOUR INCENTIVE PROGRAM DOESN’T WORK

WHY YOUR INCENTIVE PROGRAM DOESN’T WORK

Incentives are an interesting paradigm, we usually start talking about incentives because we want to see more of something; more sales, more resolutions or more widgets. The prevailing belief is that if we pay people more, they will produce more of what we want. However, there are three primary reasons this nearly always fails. Leaders don’t know what their employees really value, they haven’t equipped or enabled them to achieve the desired result and they haven’t identified the root-cause of the problem.

Let me give you an example. I work with a lot of Veterinarians and across the board one of the things they want to see more of in their practices are preventative medicines (ex. Heartworm, blood draws, early diagnosis, etc.). So, the thought is, if I pay a bonus for the percent of patients who purchase preventative services, than my employees will sell more preventative services. This approach rarely if ever works. The problems I see with this assumption are; in general money is a poor motivator (2). This is especially true for complex skills or efforts that the employee may be unfamiliar and/or uncomfortable with. When this is the case money is not only a poor motivator, it can be a de-motivator that actually reduces attention and effort. This is the second problem I see, if you know (or feel) that you cannot succeed in something there’s not much incentive to try it – it’s a way of avoiding what you perceive to be certain failure. Lastly, few leaders ever try to identify the root-cause of the problem; in other words, if it’s a critical aspect of your practice, why aren’t employees doing it?

As a leader ask yourself these questions and then consider the recommendations that follow. Each of these questions is increasingly more powerful in its ability to achieve your desired results.

1. What do individuals really care about that will motivate them?
2. Do they feel confident in their ability to achieve the desired result? Have I enabled them to be successful?
3. If it’s important to our practice, why aren’t we doing it well? What is the root-cause of the problem?

What do individuals really care about that will motivate them?

To answer the first question requires an authentic and sincere understanding of the individual. It may not mean that the incentive needs to be changed, rather, it may mean helping them see how the incentive is a means to what they care about. In the end who really cares about money in and of itself? What we really care about are the things money can provide us (ex. Stability, freedom, security, a home, a car, education for children, etc. etc. etc.). One study found that when asked what people thought their co-workers cared about, money was on top of the list. However, when asked directly, “what do you care about?” pay typically ranked 5th or 6th (1). During my MBA, a Harrah’s executive shared how they found a points system to be more effective than financial bonuses. The points system allowed individuals to redeem their points for the incentives they wanted, fewer than 30% chose to redeem points for money. Consider what your employees care about and try to align the incentive program with these things. A way to do this is to make it adaptable, the incentive doesn’t have to be the same every month. One company I worked with allowed a different employee to select a charity to donate to each month as a reward.

Have I enabled them to be successful?

Next, Alfie Kohn points out, “Managers often use incentive systems as a substitute for giving workers what they need to do a good job. Treating workers well—providing useful feedback, social support, and the room for self-determination—is the essence of good management.” Is your only emphasis on the behavior through the incentive plan? Have you given them what they need to do a good job? If not, you’ve likely fallen into this trap. So, when asking yourself the second question, be honest with yourself about your reasons. A flaw of many incentive plans is their exclusive focus on an outcome while ignoring the reasons behind it. Help people understand the reasons and feel they can succeed early on. In the beginning, focus on effort rather than results. If you measure success by the amount of effort, it becomes more attainable – I don’t know if I can convince 50% of the patients to purchase preventative medicine, but I do know that I can offer it to every patient. The other aspect to this question is, have you enabled them to be successful? When I ask veterinarians why they hired their admin I almost always hear something like this, “they love animals, are friendly and have a desire to serve our customers”. Consider how expecting someone with these attributes to sell more services may contradict their nature – I’m a service person, why am I being asked to sell? Then consider how you can enable this person to be successful. Help them see that what they are being asked to do, really is the best thing for the customer. Give them the reason, not just the expectation. If they can see that by offering preventative medicine to the customer, they are offering a higher level of customer service, it will feel like a natural part of the job, not a new and unexpected responsibility. It’s important to recognize that it may take different skills to achieve the desired result than the skills they’ve relied on in the past. So, enable them through the proper training and development, which has been shown to improve performance more than incentive plans (4).

What is the root-cause of the problem?

Now for the punchline. The first two questions are just an okay place to start. If you stop after the first question, there’s about a 90% chance you’ll be asking the same question in 6-9 months. If you stop after the second question, there’s about a 60% chance you’ll be repeating this activity in 12-18 months. The real question you have to ask yourself is this; if the behavior or result I want to see is so critical to my business, so important to what we do, that I’m willing to pay extra, above and beyond the fair and competitive wages I already offer, why isn’t it already happening? If you’re considering or evaluating an incentive program, it means two things 1) It’s important enough to your business that you’ll pay more for it and 2) It’s not about 1-2 people, it’s a pervasive problem. So you will want to start by understanding why the problem exists in the first place, before jumping to a solution. And here’s a (not-so-secret) secret, it probably isn’t because you don’t pay a big enough bonus. The answer to this question may lead to you to a number of organizational issues including processes, systems, leadership, culture and communication. However, until you ask this question and dig to find the root-cause(s), you’ll find yourself constantly evaluating and repairing naturally and perpetually flawed incentive program.

References:

• https://hbr.org/1993/09/why-incentive-plans-cannot-work
• https://hbr.org/2013/04/does-money-really-affect-motiv
• http://www.fastcompany.com/52717/change-or-die
• http://richardswanson.com/monographs/McLean(1988)PerfApprMono.pdf