I saw the tweets the other day about the "10 Myths About Employee Incentive Programs" and I figured it was just another blogger (like myself) using the tried and true "list strategy" to get traffic. It worked. A lot of people clicked on it and it's shown up on a few of my linkedin groups, tweets, and a few blogs.
There is so much wrong with this article it is amazing to me someone allowed it to be posted. And for AMEX Open to provide this type of advice for incentives borders on malpractice - geez... AMEX has a division that does incentives (AEIS) - you'd think they'd run the article by someone in that group first!
Let me dissect the post and you decide. This is not an ad hominem attack on the author - don't know her and she could be great at everything else she does - but commenting on incentive activities isn't one of them.
I got my first clue that this article was hooey when I checked the authors creds... The author has a community blog - wait for it - about saving money and being frugal. Her background from linkedin shows she has been in advertising for 9 years. I'm not hating on her background - just putting it out there since it is relevant to whether she has the chops to tell us about the 10 Myths of Employee Incentive programs. No experience in incentive program design.
Below is a recap of the article with my commentary. My commentary is in red with shading behind it.
(From AMEX Open - article on myths of employee incentive programs)
1. It boosts morale.
One of the biggest reasons companies use employee incentive programs is to boost morale (and hoping that the boosted morale would in turn boost productivity). (FALSE: most incentive programs are designed to achieve specific and measurable objectives. Morale is RARELY if ever an objective of an incentive program.) This is a shortcut, and one that doesn't solve the underlying problem. Morale usually not low due to a lack of incentives. Typically, morale is low for reasons like bad management. Offering gifts or cash in exchange for extra work doesn't address this.
Companies often relate morale with compensation. The adage that more money means more happiness is pervasive in corporate culture. (Maybe in 1950 - most managers today understand this is patently false.) These programs are often thought of as "throwing a bone" to their workers so that they'll be happy and productive. It might create a short burst of increased productivity, but because the actual cause of bad morale is never addressed, the problem creeps up again and again. Over time, the company might blame the workers for being greedy and unreasonable when they're using the wrong remedy in the first place.
2. It shows the company is generous.
You aren't fooling anyone. You're not doing this for your employees. You're doing this for yourself. It is a purely selfish deed. You are offering your employees something in return for something else. This isn't a gimme, a gift, or an act of kindness.
Management sometimes get confused when workers aren't more enthused or appreciative of the program. From the company's point of view, they're offering something extra, a bonus, an opportunity for more cash. From the workers' point of view, they're being asked to do more and work harder. The incentive is usually viewed as additional compensation for additional work. There's nothing generous about it. (In 20 years of designing incentive programs NEVER was this a consideration. Generosity is not a factor - companies understand the issue of quid pro quo and so do employees. The "incentive is viewed as compensation" line is also false - unless it actually is compensation and that is a very different discussion.)
3. It boosts productivity.
If your problem is productivity, consider whether you've provided all the tools and resources available for the productivity standards you are looking for. If you are too cheap to buy your workers new computers, but are frustrated that they're siting around idly while your tech guy has to diagnosis yet another problem on their computer, offering incentives to be more productive will simply cause more frustration. Your workers will see your demands as unreasonable since you haven't provided them with the tools to be productive in the first place. (Agree with this - always look for root causes before thinking the problem is motivation.)
A problem with productivity is usually caused by a flawed system. (Evidence please?) Inefficiencies often build up and cause bottlenecks in the workflow. Ask your workers if they have suggestions -- they're on the ground floor, experiencing it every day. They might know better than you. ( I do have to agree with this...asking employees first is always a good strategy.)
4. It provides motivation.
If motivation is the goal, then an incentive program will provide it -- it will provide motivation to get the reward. But usually, that's not the kind of motivation companies are looking for. (I know - you want Dan Pink motivation - motivation that comes from the inside - check out post on that here.)
The difference is that incentive programs provide extrinsic motivation where you were hoping for intrinsic motivation. Extrinsic motivation, offering rewards for action, provides an empty pursuit for the reward itself. Intrinsic motivation is what pushes people to do better. Morale, leadership, and vision contribute to intrinsic motivation. No incentive program can provide intrinsic motivation. The best you can hope for is extrinsic.
Understanding this limit of incentive programs will go a long way in crafting one with realistic expectations. While incentive programs will never provide you with things that result from intrinsic motivation, such as higher quality or creative expression, these programs can still be used to encourage very specific and quantifiable objectives. (She must have watched the Dan Pink video... but again, in goal specific situations, incentives can and do provide additional focus on things the company needs to focus on - you can't just paint all behaviors as something intrinsic motivation will solve either.)
5. Metrics are infallible.
When companies rely too much on metrics, a lot of the details get lost. Metrics are often a very small piece of the puzzle, but companies use them to translate all sorts of big picture theories. Quality gets lost in the race for quantity, because metrics are really only able to measure quantifiable things. When you use metrics as your standard, you are using a very small piece of the puzzle to define the entire picture. (Ah... you can measure quality - done every day via surveys and inspection. Incentives for quality have to be designed different but they can provide a focus that increases quality. This is again a false statement with no evidence.)
When you use metrics to reward an outcome, you often shift your workers' focus from the big picture to a small part of it. Instead of doing their work better, they do a very specific and particular part of it better. While your intention was to produce a better picture, you end up with a perfect puzzle piece. It's a very inefficient way of raising overall quality. (If I can make each piece perfect wouldn't the final puzzle be perfect? Providing an overall reward program with elements focused on specific parts of the process can accomplish what the author says isn't possible. Again, without experience it is easy to think incentives will dominate the employee thoughts and actions when in reality it can enhance focus WHILE connecting to an overall objective.)
6. The reward is most important.
Whether the reward is cash or just recognition, studies show that the type or amount of the reward makes little difference -- it's the incentive structure itself that defines the effect. Basically, spend less time on the details of the reward, and more time on constructing a valuable and effective program.
While nothing really compares to getting cold, hard cash, nonmonetary rewards offer employees some tax free benefits. (Studies show cash is less effective and non-monetary awards ARE taxed - very, very bad advice.)
7. A little competition is good for the workplace.
Incentive programs that do more harm than good are usually the ones that involve competition. When you identify winners, there will always be those that feel as if they've lost. When you incentivize individual gain, you discourage teamwork. When you offer high stakes, pursuing creative freedom becomes too risky. By making them compete for limited spots, you devalue the variety of talent.
Friendly competition can be had if the reward is small and the task is inconsequential. Having sporting events outside of work, or offering awards for small things like "cleanest office" are fun and contributes to the overall work environment. But pitting them against each other on their work skills is a formula for disaster.
Use programs that are open-ended and inclusive where any number of workers can meet the goals and no one loses because another won. (I smell Gen Y here - everyone gets a trophy. Competition can be effective when properly designed. If done poorly it can be demotivating. And you get a thumbs down for using the word "incentivize" - not a real word folks.)
8. Incentive programs give employees a sense of ownership in the success of the company.
While it's true that recognition and compensation contributes to their sense of ownership in the company, incentive programs specifically don't do this. There's a fine line between an employee's sense of worth and value to the company when he or she receives unexpected recognition and sincere appreciation and negating that completely with incentive programs that offer compensation in exchange for work. Having management that provides solid leadership, positive feedback, and proper guidance can provide a sense of ownership that no amount of compensation can. (A lack of experience and expertise shows here where recognition and incentives are used interchangeably - they are distinct and different things - targeting distinct and different responses and outcomes. Also, "unexpected" isn't always a good strategy - how can I determine what is acceptable in my work environment if I'm "guessing" what will be recognized. Just poor advice.)
Profit-sharing programs are often instituted as a way to get that sense of loyalty to the company. However, as an incentive program it's difficult to measure success and effectiveness. (Why? - It's done all the time - individual behaviors can easily be linked to company goals and objectives. While no single behavior can ever be linked as "causal" to profitability - there are some direct linkages that can be made ie: number of sales calls increases number of conversations increases sales and affects profits.) So many factors contributes to a company's bottom line that a profit-sharing program may focus disproportionally on some factors while ignoring others. It's the program that provides the least amount of control over specific objectives, and offers many ways for employees to make out on the hard work of others. (Again - poorly designed programs do - well designed programs adjust for this issue.)
9. Our employees won't try to game the system -- we have a good relationship and we trust each other.
Employees don't game the system because they are spiteful or disrespectful. They're only following your lead by placing importance on particular metrics that you've asked them to improve. When too much emphasize is placed on incentive programs and the rewards that they offer, the collective focus turns to it. Employees then shift their energy into getting the reward (because that's what extrinsic motivation does). The gaming is inevitable. It might not affect the numbers directly, but it makes the employees value the numbers disproportionally. (Only if the reward is out of whack with the behavior - again, if the author had EVER designed a program this would be evident to her. Also, unintended consequences is something every professional program designer is aware of an compensates for in the structure.)
10. If an incentive program isn't working, it just needs a few tweaks to make it perfect.
When companies rely on incentive programs for results, they are assuming that their employees simply lack the right motivation needed for them to do their job fully. When incentive programs don't work, they rarely consider that perhaps it's not incentive the workers need, but something much deeper. (I'm guessing this was pulled out of thin air because the author needed one more point in her quest to have 10 items. No incentive is perfect - but ongoing updates and changes are needed to fine-tune the impact and ensure the appropriate behaviors are targeted. Not all company issues can be fixed or addressed by incentives either. The idea that a company would "rely" on incentives for all their business ills is a problem - not the incentive itself.)
So out of the 10 Myths - the author got pretty much 9 of them completely wrong and one half wrong.
For those of you who have been involved in successful incentives and understand how their application and design can positively affect a companies success - I truly apologize that you had to read such a misguided and incorrect article. However, as my post yesterday highlighted - there is a movement to think of incentives and rewards as the main virus affecting companies today and eliminate them.
Please read these types of articles with a critical eye - it is obvious that there is little experience or expertise behind the words.
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Marketing and Incentive Design Consultancy