I had this post queued up for a while and couldn’t figure how to use it until I saw this post by Steve Roesler who writes at “All Things Workplace.” His post explores the fact that what we think is fair is a relative thing – it is a function of what the “others” have or plan on having.
Fairness isn’t a set point. Fairness is a point relative to other points.
Incentive and Reward Programs Need to Be Fair – And They Need to Change
When designing incentive programs – especially when they are focused on a specific job function – say sales – there has to be some discussion on the relative fairness of the program. A program that over-rewards some folks relative to the rewards others get will have a negative effect on those that don’t get the big award.
This isn’t a uniquely human issue. Experiments with monkeys show they too seek fairness and equity with respect to rewards. In this video on the Situationist Blog, Dr. Frans De Wall from Emory University describes an experiment in which monkeys were given either cucumbers or grapes as a reward. When one monkey is given cucumbers and the other is given grapes – the one getting cucumbers will rebel, throw away the cucumber and refuse to perform the behavior.
They even give it a real scientific name – inequity aversion.
The video goes on to explain that in “normal” times – when we’re getting pretty much what we expect and the gap (while probably still large) between what “I’m” getting and what “they” are getting is a bit smaller we live with it. However, when that gap grows we start to rebel.
Incentives in today’s environment need to be cognizant of this issue.
Cuts To Salary, Benefits, Rewards
As companies pare back their benefits and rewards for the “rank and file” but keep big bonuses and other perqs steady for the top brass the gap will widen – and widen to a point where it’s not just that people will stop responding to the incentives – they will begin to operate in a negative way.
Rewards need to be contextual.
What you paid in rewards last year may not be the best payout this year. That trip to Hawaii for top sales people may have been the right reward in 2004 but it may be more prudent to send the top people to Arizona this year. Don’t assume that what you’ve done is what you should do.
Every program should be reviewed and analyzed to see if it still fits within the “fairness” window. You may find that many programs that initially were fair may seem decidedly unfair in today’s business reality.
I've said it before and I’ll say it again – Incentives are NEVER plug ‘n play.
Yeah, I think awards should also adjusted in a certain period so that make sure the awards have its incentive ability and function to motivate people to work hard. The awards should be reasonable, suitable, and fair to make sure people will have strong interest to do what you hope them to do.
Posted by: Patrick | October 09, 2010 at 09:24 PM