Incentive schemes or not?

When a colleague recently voiced the view that incentive schemes don’t work particularly well, if at all, I was relieved and concerned. I was relieved to discover I wasn’t the only one with doubts about them and I was concerned because they are now seen, pretty much, as an important part of employee packages and an accepted inducement in the employee-motivation-achievement stakes. I have some doubts about these schemes and do wonder if they may unwittingly have the counter effect to the one intended.

In listening to a number of managers discussing their organisations’ incentive schemes, it appears that in most instances, they weren’t motivating, as expected. Rather, they were mostly a source of frustration, upset and demotivation. How so, you ask?

Some schemes require extensive documentation. They need evidence of every achievement, every action demonstrating a particular skill, down to the finest detail. For some, the extent of the paper work, the level of detail required, the time required to complete the documentation and to compile the body of evidence, is seen and experienced as not being worth the effort. A drag, not an inducement, some say.

Another common complaint is that in some organisations, the criteria for receiving a bonus is sometimes not entirely clear or known to participants, either pre or post judgement day. Sometimes people have found out important scheme-related information after the event. Others, have experienced an inconsistent application of the same criteria, across their colleagues. Frustrating, annoying and demotivating, some report.

Another source of disquiet is the situation whereby a years work may be impacted upon negatively, by events outside of the employee’s control. In some experiences, this means the employee is still accountable for not meeting the bonus-related outcomes, regardless of their efforts, regardless of the other contributing factors. The path to Resentment Alley, it seems.

Sometimes too, some systems are difficult to understand and believe in, especially so for literal folks, who expect things to mean what they say. Schemes that promise a % of the full base salary (meaning, full base salary plus x%), may really mean a part of the base salary is withheld as a matter of course so the “bonus” to be had is in fact the remaining portion of the base salary. Hmmm.

Often, a bonus may not be seen as an adequate reflection of extraordinary effort, because the bonus available is capped. What can also be the source of real resentment and loss of motivation is if an employee places $x value on their extra effort and the employer places a lower value on the same effort. The outcome for employees? Sometimes considerable angst over a small amount of dollars and anger at having to accept whatever one’s ‘value’ is reduced to.

It seems also that schemes are, by their very nature, controlling. The agreement is if you do this, you’ll get that. One person has the power, the say so over what is needed to be done, what you’ll get if you do it and whether you actually do get it. This unequal power arrangement can damage working relationships.

Rewards may also punish, in that if people don’t get the reward they believe they are entitled to, they do feel penalised. They may also feel aggrieved, angry, resentful, bitter and demotivated, as a result.

Rewards may also discourage risk taking – have you ever heard people say ‘I don’t want to jeopardise my bonus; I don’t want to rock the boat?’. I have. Rewards may also discourage effort – have you heard ‘my staff know the level of what I need for them to get a bonus, so they don’t go beyond that?’. I have. How about ‘that person didn’t really perform, left a great mess behind them, yet they still got their bonus. I exceeded my targets and got the same bonus – what’s the point?’. Heard that too? Rewards may also motivate people to get rewards only, not to do their job well, as a matter of course.

What’s wrong, one wonders, with the notion of doing well the job you’re paid to do and dealing appropriately with the people who don’t perform? What would happen if the rewards were removed – would the effort and outcomes be the same?

It appears that incentive schemes are based on the belief that everyone is motivated by the same thing – money. Not so, according to studies on the topic. Studies have shown that a significant gap exists between what managers believe motivates employees and what employees say motivates them. Research has also indicated that managers often think that all people want is money and promotions. However, the highest incentives desired, apparently, tend to be praise and recognition, followed by promotions based on performance.

Do know that not everyone is motivated by extra money. Do ask your staff for feedback on your existing incentive scheme. Find out whether the scheme encourages normal effort, extra effort or discourages effort and motivation. It may well be time to then go back to the drawing board.



First Published NZBusiness September 2002�

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