Sway – More Irrationality and Influence

A few weeks back I highlighted a book called “Predictably Irrational.”  I liked the book a lot and I posted a bit on the impact some of the concepts in the book can have on the design of incentive programs.

Another book in a very similar vein was recently released – called “Sway”  -written by two brothers – Ori Brafman – a Stanford MBA and Rom Brafman – a Phd. in psychology (the perfect combination for this blog.)  Rom saw my post on Predictably Irrational and offered up a copy of "Sway."

I received the book and read through it twice.  While not as long as Predictably Irrational – many of the same themes are touched on.

Via an email stream, I asked Rom to weigh in on how these “irrational” behaviors can be leveraged within an incentive and recognition context to help align behaviors of your target audience.   The cyber-conversation ended up longer than I expected so I’m breaking it into two parts to be posted on separate days.  Today is about program fairness, when to use “monetary” incentives and the issue of gain vs. loss as a way to influence behavior.

Tomorrow we talk about how to reward and recognize teamwork and how to leverage commitment.

Questions in bold, black type.  Rom’s comments in blue, bold, italics and additional Incentive Intelligence commentary below that.

Part One

One of the main themes I see emerging from interviews on how to structure programs better is the issue of fairness of the program.  Is there anything in Sway that could impact that issue?

"When we receive frequent communication we often make the connection to fairness. For example, startup CEOs who maintain frequent communication with their VCs are viewed as being more reliable and possessing stronger potential for success, even though it’s a completely subjective evaluation without any facts to substantiate this claim. Similarly, the way we communicate with our employees and customers shapes their perception of who we are.

People like to be kept in the loop, to know what’s going on, and if there’s something that they dislike, they want to hear an explanation of why this is the way it is, as well as getting their feelings validated. Oftentimes you see managers who do a lot of good stuff behind the scenes but they don’t communicate that, they take it for granted that that’s their job. But without the communication, the person on whose behalf they’re working might feel less important because they’re not actively involved in the process."

We’re not suggesting that frequent lies equal fairness.  If you get caught, you go to the bottom of the trust/fairness ladder.  What this point brings home is that people are willing to forgive and continue to trust a source if a sense of transparency exists.  In other words, if we communicate frequently about both the good stuff- and the mistakes we make – the tendency is to trust the source more and assume they are being fair.

This comes in to play during incentive programs if the reports on standings are wrong.  Fess up and explain what happened.  If you don’t the audience will just assume you’re messing with them and all future communications will be seen through that lens.  However, by keeping them in the loop on the mistake they will take your word on future good news better and assume you’re acting in their self interest.

I typically recommend that a company shy away from too many programs and incentives that use “monetary-like awards such as cash and debit cards.  I have mentioned in the past that it can backfire if you start to “pay” people for things that you want them to connect to emotionally.  What about that?

"People naturally want to be helpful and if we can appeal to that sense of altruistic behavior, it can generate a lot of good will. The catch is that as soon as we offer up a monetary reward, we cut off this altruistic motivation and instead introduce a quid pro quo system.  A good manager is like a Jedi of sorts, knowing how to use rewards when necessary, but also building an atmosphere that encourages altruistic behavior."

This is where experience can play a part.  I have tried to make the case that things that link to your values, mission and purpose should be less “monetarily” rewarded (points, cash, debit card deposits) and more recognition rewarded – plaques, mentions, public kudos – in order to cement those behaviors as norms for the organization and make tie to the emotional area of their behavior.  Remember, once you introduce the monetary angle you are almost guaranteed to have a steep slope to climb if you every want to stop the rewards. 

Should you include an opportunity for participants to “lose” points earned in a program?  Based on the concept of loss aversion – is it possible to increase participants’ efforts if you put some of their award at risk.  I’m thinking about loss aversion – when faced with a loss – people will work to avoid that loss.  Based on your point of view – is this a good idea or a bad one?

"It can work as a double-edge sword. Because people tend to over-react to losses,–the pain associated with a loss is usually felt twice as intensely as the joy associated with an equivalent-sized a gain—participants might be willing to put in extra effort to minimize their losses.

But the other possibility is that because the threat of a loss makes us feel uncomfortable, we might give up on the program all together because it’s no longer fun. The perfect mix might be to throw in some loss scenarios but to do it in a fun/game way, so it does not come across as punishment. "

In many programs I have successfully used the concept or random awards through an online game.  Based on performance you get an opportunity to go to a game, where you either click on a box – or spin a wheel – and a random award will be presented.  Some are worth a lot – some aren’t.  One of things that we do in this scenario is make sure that no one walks away a “loser.”  To Rom’s point – we eliminated the real downside risk – but make the upside gain very attractive.  Take Rom’s advice to heart – we overact to losses versus the equivalent gain.

Today’s Net-Net

So – communicate often and  honestly to create a sense of fairness, keep self-centered behavior separate from group support behavior and don’t put too much of the participants’ earnings at risk if you decide to spice up the program with some games and options to garner attention.

Come back tomorrow anad see how Rom handles team dynamics and commitment issues.  Sounds like a soap opera eh?