The Incentive Test

One of my favorite images of all time (sorry PETA folks) is the cover from an old National Lampoon issue.

So what does this cover have to do with incentives?

Incentives have two poles - rewards and punishment.  I can move your behavior based on providing an incentive or I can punish you for non-performance.  The magazine cover demonstrates this very vividly.  If you don't do what I want - there will be negative consequences.

I was wondering if this idea of opposing sides to incentives could be used to test the validity of an incentive and reward structure?  What if we re-frame the rules using the negative - and see if it still makes sense? 

If you wouldn't punish someone for missing a goal then maybe you shouldn't reward the same goal.

As an example:

"Make a sale this week and get an reward" would become "Make a sale this week or you're fired." 

Would anyone think that was a good idea?  There are so many things outside a persons control that affect that outcome.  Would anyone think this is fair, equitable, right, moral?  Doubtful.  We know sales performance is the result of a lot of other things - some under our control and some not. 

You could say make 10 cold calls (that's a behavior) or your fired.  The person could make 10 calls - that is totally under their control.  You wouldn't think that was unreasonable at all. 

I think when you frame the program rules within the context of negative reinforcement it highlights the disconnect.

Anyone care to weigh in? 

Comments

[Paul Hebert]

I received an email with a comment on this post - the comment was:

"This brings up a good point - if we are willing to incentize and reward those who meet or exceed stated goals, how should you treat those who underperform and don't meet the goals? Do you keep underperformers around for merely doing the bare minimum?"

My response (keeping the political season in mind) - It depends. The word used was "underperform" which means does not meet the performance standards and therefore you don't keep them around. If however, by underperform you mean "does not exceed minimums" then the key is to describe what you mean. Too often we tell people they are meeting standards but don't tell them what exceeding standards looks like. If I don't know what you're looking for I can't help you find it.

Each company is different and each job is different. I would suggest that if someone is doing the minimum you have two choices. Continue to keep them on the staff but do the minimum to keep them - or change the minimum.

I'm a firm believer that employment is a two-way street. If the company gives they have a right to expect the employee gives. If the employee gives, they have a right to expect the company to give. If neither of these conditions are met then the company can disengage (fire them) or the employee can disengage (quit.)

[Kris]

Paul -

Loved the topic. Here's a riff on the performance management tie-in...

http://www.hrcapitalist.com/2008/02/if-your-use-inc.html

[Ann Bares]

Paul:

What a thought provoking post. I am struggling, though, with the concept of incentives that you have laid out - with the two opposite poles of reward and punishment. And I'm wondering if I am just missing - or misunderstanding - your point. The image of a continuum which stretches from negative to positive seems to me to have as its foundation the idea that incentives are, essentially, about coercion. Trying to get you to do something you otherwise wouldn't want to do, and its only a matter of determining whether a bribe or a punishment would have better effect. It feels too Alfie Kohnish to me. My concept of incentives (and, granted, I come to this with a biased point of view) rests on the idea that they do two important things - they clearly signal what needs to be done, and they provide a way to share in the value created by getting the needed thing done. And I'm having difficulty integrating your point in this post with my mental model. Help me understand!

[Paul Hebert]

Coercion is such a dirty word. Although, it is the antonym of coax or persuade, so it is on the same continuum as the + and - reinforcement I mention in the post. In psychology rewards are either positive or negative. In either case rewards are used as an incentive to change - to influence behavior.

Incentives and reward programs by definition are designed to reinforce an existing behavior in order to get more of it and in some cases, reduce a behavior in order to get less of it. Many times someone will welcome the change - other times they won't.

Think of incentives as a way to break the inertia of doing nothing.

In order to break the inertia I can either provide a positive reason (carrot) to change or provide a negative reason (stick.) So in effect I am using coercion in one case and incentive in the other.

My point in the post was that by putting the rule structure in a negative context it may highlight that the thing you're trying to influence (in my example sales) was the wrong thing. By using an extreme negative as the reward jars one into evaluating the measure. If you think firing someone for not doing (or doing) something is too harsh it probably means the measure is wrong and to look for something else to measure.

Help?

[Ann Bares]

Somewhat, but I'm still not there. But I appreciate your gracious willingness to dialogue.

Here is the essence of my problem: I can think of a lot of "incentive" programs where the measure seems appropriate, but I can't imaging firing someone or using negative reinforcement for not achieving it. For example, one client of mine operates in an industry where workers are potentially exposed to lead - an extreme toxin. They have worked very hard and have put many policies and standards in place to minimize the possibility of worker injury or ill effect. One component of the incentive plan they have in place rewards individuals or teams who can develop or create ways to improve safety (as measured in a couple of different ways, like air lead levels). I can't see firing or putting a negative reinforcement (salary decrease?) in place if a team tries but is unable to do something that positively impacts these safety measures - yet I think it makes tremendous sense to recognize a breakthrough or innovation that does make a positive difference. I can think of many other example plans/programs where I come to the same place - I think the measures make sense, but it doesn't make sense to me to fire or negatively impact people if the improvements we seek are not achieved.

Am I missing your point, or do I simply have to agree to disagree?

[Paul Hebert]

One of the things I love about this "new media" stuff is exactly this dialog. The ability to connect a thought with others helps develop it more fully. You are doing just that for me Ann - Thanks!

My thinking process was about using the negative side of an argument to provide perspective on the behavior to measure - I wasn't suggesting that one actually use negative reinforcement.

If I were to use your example in my “incentive test” process I would state it in the negative and see if it still makes sense - “if you don't do anything about safety or through your actions decrease safety you can be fired.” I think most people would say that this is an acceptable response to someone who ignores safety rules or doesn't wear appropriate gear in a hazardous work environment. So the behavior is one that is controllable by the individual therefore, the positive side of that behavior – wear the right clothes, participate in safety awareness, take safety training, contribute to safety ideas – would all be good measures for an incentive or recognition program.

On the flip side – same safety programs reward people for number of lost days reported. Would you fire a team of people if someone on their team had an accident? Probably not. Therefore, why would you reward a team for not having an accident (you may however, want to recognize the behaviors the team exhibited that led to their success.) The accident (or lack of accident) is not the appropriate measure – the behaviors that led up to the accident were.

It's not a pure rule – but it does help me determine if the measure I'm using is at least in the neighborhood of what I should measure. There will be many instances where the test may not work – but it is one that helps me frame the program structure better.

Closer to agreement?

[Ann Bares]

I think so. I do see the value of having this rule as one way to examine and frame a potential incentive situation in order to assess whether 1) incentives even make sense and 2) whether the measure you are considering is the right one. The "lost labor days" safety example helped.

Although the discussion also leads me to consider a different version of the rule: If you would be willing to fire someone for not exhibiting the behavior in question (ala the performance measure you are considering), then the behavior in question might be a condition of employment, rather than something you would incent.

Thanks for the dialogue, Paul - always good to stretch your head to consider new angles and approaches!

[Paul Hebert]

Your point is well made.

If it is a behavior you would fire someone for then it probably is the "minimum" standard of performance and you're right - would not qualify for an incentive type reward.

[Kim Patrick]

I am constantly battling with the two ends of the spectrum - reward verses punishment, as I have four children. However I always find that I get better results by coming at things from a positive perspective and looking to reinforce good behavior rather than come down on the bad.