Risky Business

I spend a lot of time thinking about how people will behave given choices and options within a performance program.  My goal is to provide a scenario where the target audience will change or adopt a behavior in order to help my clients achieve specific business goals.  Providing a program or idea that will influence behavior requires I have some understanding of the psychological principles at work.  The real key to success is to know, or at least have some basic understanding, of how the "theories" will actually work in the real world.  While many programs are designed with the idea that people are rational and therefore make rational decisions relating to the rules of a performance program – the reality is people aren’t rational… at least not when we think they will be.

Truly successful program design will take into consideration the "irrationality" of the target audience and design and frame the rules communications in such a way as to leverage these non-rationale events.  A perfect example that can have impact on performance and incentive programs is the approach to risk and gain when people are given opportunities to gamble.  This post on PsyBlog outlines a study on gambling behaviors.

The net-net of the article and the study is that when the potential for loss is there, people
prefer to take a risk. They become risk seekers. Yet, when there’s
the potential for gain, people are often risk averse.  How does this affect an incentive or performance program you ask? 

Most programs are designed around "earning" something (gain) based on behavior change.  What if I re-framed the rules so that everyone starts with a bank of award value and the person loses something each time the behavior is not exhibited?  Most folks will say that incentives shouldn’t be punitive – as this would seem to be.  Yet the theorists would tell you that you will have more desire to gamble – to do the task – in order to avoid a loss than you would to gain something. 

I’m sure that a key element of the equation is the "uncertainty" factor associated with the loss or gain.  But, then again, most programs are designed with 100% certainty the participant will get the award if they demonstrate the behavior – and they still don’t! 

Look for more on the topic of why people do and don’t change behaviors (even when faced with death) when I highlight some interesting information from the book "Change or Die" in the coming weeks.