I get frustrated some times as I peruse the google alerts I’ve set up for incentives, rewards, recognition and other topics related to designing and delivering great influence programs. Mostly because I continue to see bad advice being doled out over and over again.
Specifically, I see incentive “professionals” telling potential clients that good incentive design requires that awards be tied to results. How else can you prove and ROI?, they state. While developing an ROI model is difficult when the outcomes from the incentive are not tied to specific metrics, like say, increased sales... it is not impossible.
If all you focus on is the “result” you will have bad program. #Fact.
Case In Point – Cheating and Teacher Incentives
Dan Ariely recently provided his point of view on the scandal that is unfolding (or unfolded) in Atlanta city schools where 179 teachers and principals have confessed to cheating to increase scores on student test scores. Dan is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University and wrote the books Predictably Irrational and The Upside of Irrationality. He’s the bomb when it comes to behavioral economics and how we respond to different incentives and influence tactics.
I’ll let you read the full article here... but the points from his post that I think are critical to remember are:
"But having this single measure for performance placed so saliently in front of them, and knowing it’s just as important for their school and their students as it is for their own reputation and career, most likely motivates some teachers to look the other way when they have a chance to artificially improve those numbers."
And...
"The notion that we take something as broad as education and reduce it to a simple measurement, and then base teacher pay primarily on it, has a lot of negative consequences. And, sadly, I suspect that fudging test scores is relatively minor compared with the damage that this emphasis on tests scores has had on the educational system as a whole."
Now think about the various things in your own company that you have incentives layered upon (or you are planning to layer in an incentive ) – are they not complex?
Do the outcomes you want require people to do multiple activities and be skilled at multiple behaviors in order for those outcomes to be realized or improved?
Selecting a single measure – or a single outcome – influences people to put way too much emphasis on that outcome – the “what” – and not enough attention on the “how” and “why.”
The “what” becomes the goal - then come hell or high water your participants will achieve that outcome.
Ethics be damned.
Focusing more on behaviors means that your audience will be learning and practicing the things that will eventually lead to the outcomes you want. And those behaviors will begin to be internalized – reducing your need to run the incentive in the future.
And you’ll worry less that someone will go rogue in the organization in order to hit their “numbers.”
And... by the way... this issue is compounded when the award value is too rich for the behavior/outcome you're targeting.
Do I have to say “Wall Street” again.
“The More You Know.”
I got this comment via email on this post and asked that the person put the question here in the comments for me to address. I haven’t seen them post here – and the email was from a mobile phone so I’m going to make the assumption he would if he could and go ahead and post it anyway without waiting.
The questions asked...
So, if we should be measuring behaviors over results, as you state in your 7/21 post, how does one conduct an ROI with behaviors as an outcome?
Moreover, how does one define the behaviors you want to incent, and measure if they are occurring? I would think that would be just as riddled with unintended consequences.
I’m going to address the second question first...
Every outcome is the result of someone doing something. Key to designing the best program is a pretty good dive into the behaviors that lead to the outcome. Start at the outcome and back up. An abbreviated example would be...
Sales = awareness+contact+discovery of problem to solve+discussion of options+presentation of options+discussion of solution presented+equating solution value to problem cost/issue+discussion of cost/value+signed deal.
In this case I’d probably also start weighting the different behaviors – which are more important – which less – and then have way to track those behaviors.
If it is discussions – then meeting notes logged into a CRM system can be a good proxy for that behavior – so maybe the sales person get’s 10,000 points for each document put into the system (bonus points as you move through the behavior chaing.)
That’s how you connect an incentive to a behavior.
Is there a possibility for unintended consequences?
Absolutely – people could clog up the CRM system with garbage notes to get the points. But have you ever heard of “managers” or “supervisors” or even peer review (how ‘bout a rating system by the account team?) to help manage quality.
ROI- simple enough – did more sales result in influencing people to follow the process?
Yes – then whoo hoo – you win.
If no... then have you identified the behaviors correctly? Did you miss something in the process? Are you people not trained well in each of the steps?
These are questions that need to be answered – and truthfully – the only way to really identify what needs to be addressed is through a program that identifies behaviors.
If you ran the incentive solely on results – and didn’t hit your goal the natural reaction is to say either the incentive wasn’t enough or ... you have lazy people.
Neither of which is the right answer in most cases.
Wow... this turned into a post in itself didn’t it...
Posted by: IncentIntel | July 21, 2011 at 09:20 AM
Great post, Paul - and great answer to the first comment.
You know I believe the company values are the place to start in behaviors to recognize. Obviously, company leadership has invested a great deal of time in determining that these values (which are usually behavior-based) are critical to company success.
Also, recognizing employees whenever they demonstrate a company value (desired behavior) ensures employees are recognized during the "process" -- mid-point in a project, perhaps. Sure, celebrations are right and appropriate once a big project is complete or results are achieved, but recognition of progress and appropriate behaviors during the process - that's what keeps people focused and motivated.
This post quoting Wally Bock is a good example: http://www.recognizethisblog.com/2010/09/removing-obstacles-progress-recognition/
Posted by: Derek Irvine, Globoforce | July 21, 2011 at 03:02 PM
Two things come to mind on how your answer to the post above (this is the question emailer, by the way. Hi.).
First, that's still not an ROI. An ROI is return on investment, and usually the numerator and denominator are both in dollar terms. Investment, presumably, is the cost if the incentive. In your example above, it can be the reward for posting of quality meeting minutes. However, the only dollar term I see above for the numerator is the increase in sales, so you would be measuring the outcome, not the behavior.
The only way to account for that that I see is to incent the behavior, but measure the outcome, unless there's some other sweet way to calculate the dollar value of the behavior.
Second, there are hundreds of behaviors that result on a sake (using your example above). Not only that, there are hundreds of systems of behaviors that lead to sales, and they can be broken into tiny levels. How do you pick a system of behaviors to incent without nullifying another way of doing things? How do you account for a salesperson who has a different way of selling than the behavioral system you prescribe?
Posted by: Matt | July 21, 2011 at 06:47 PM
Matt - you're right the ROI is the cost or investment and the dollar return. So you are in fact influencing behaviors that influence sales. Therefore, you can, as you say - reward behaviors and measure outcomes. The difference is that I'm not rewarding the outcomes. The ROI is management's issue - not the sales person (using the example.)
In most companies there are specific and trainable elements/behaviors that lead to a sale. Those are the first things to look at. As you mention there are other variables that influence sales - market conditions, competitive pricing, etc. However, those things don't affect behaviors - just outcomes. Because a competitor has a different pricing structure shouldn't penalize the sales person if they are following the process. Pricing isn't the sales person's control - usually and within reason - some have autonomy to set pricing. But in any event - if the person is doing what you want they should get rewarded - not penalized because the pricing department screwed up.
Sales people are variable and some sell differently than others. However, there are usually some very specific behaviors that drive more sales than others. The beauty of incentive programs is that everyone has a choice to play or not. If a sales person is successful doing it one way - they don't have to play the game. They can keep on doing what they are doing. No penalty.
However, if they are that successful then the company should mirror those behaviors in the incentive program to get all the sales people to do it that way.
Posted by: IncentIntel | July 21, 2011 at 07:09 PM