A very brief twitter exchange with @DonPeppers - the prescient co-author of the book One To One Future and co-founder of Peppers & Rogers Group - once again reinforced the fact that a lot of the problems the business world has with incentives and rewards is based on a lack of clarity of definition.
The brief twitter exchange looked like this:
(note: the blanks in the image are because I used the wrong twitter account for a couple of tweets - I changed it on the image to give you the real feel for the exchange.)
As you see - Don and I are in agreement - however the articles referenced in the initial tweet (links here, here and here) - don't make this distinction. They are focused on the use of "bonuses" for achieving a goal. Side-note: I did like the content in the second article - Stanford site - they make an argument that in many agent relationships the company sponsoring the incentive has little information on the behaviors of the agents and therefore default to outcome-based incentives. I recognize these situation exist and therefore pose special incentive design challenges.
But in any event - I thought it would be good to start the week with a "primer" on the word INCENTIVE:
From Merriam-Webster: something that incites or has a tendency to incite to determination or action
From Cambridge online dictionary: something which encourages a person to do something
From Psychology Glossary: Incentives are those stimuli in the environment, both positive or negative, that motivate our behavior. These things pull us to behave in certain ways (as opposed to drive which pushes us from within). For example, if you are offered money to perform a certain behavior, the money is the incentive to perform that behavior.
From Wikipedia: any factor (financial or non-financial) that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives. It is an expectation that encourages people to behave in a certain way.
(Highlights and emphasis mine.)
Behavior - Not Outcomes
In all the definitions listed above the operative point is that incentives provide a stimulus for a specific BEHAVIOR. Not one of these definitions - or the various other ones I found but did not include - say anything about changing an OUTCOME.
Incentives change behaviors - not outcomes. Therefore, incentives cannot be applied to outcomes.
Telling someone you will give them $1,000,000 for an outcome - is an incentive - just one with indeterminate behaviors. That is why you have undesirable unintended consequences.
The bigger the "reward" for an outcome with poorly or fuzzy behaviors is a sure recipe for disaster.
I implore all of you who are DIY incentive planners - take the time - identify behaviors and use those as your basis for incentives.
A
Marketing and Incentive Design Consultancy