Incentive Programs Are Your Worst First Option

You’d think the title of this post would be the last thing you’re read on a site that focuses on how to design incentives correctly.  You’d think I’d spend my time telling you about how incentives are great, how they can cure poverty and how they are better than the iPhone 4S.

But I can’t. 

It’s just not true.  Incentives are your worst first option when thinking about how to drive behavior in an organization.  I created this little “infographic” a few weeks back to help you avoid using incentives before you’ve looked at other options.

The fact is that if you’ve got the right culture, if you’ve got the right managers, if you’ve got the right people – incentives may not be required at all.  Especially – I’ll say it again – ESPECIALLY if you want long-term change in an organization.

Sure incentives are faster – they can get people to do things quickly.  Sure, incentives are effective – they CAN impact performance.  But, just like many morphine-based pain killers – they can also be deadly and create unintended consequences.

Example:  Internal Promotion – How Chipotle Reduced Turnover by 64%

Ben Eubanks posted on UpStartHR this post on how Chipotle – the “fast” food Mexican joint used internal promotions as a way to stem the tide of employee turnover at its retail locations.  To pull from his post:

“When they started promoting from within instead of looking for talent outside the organization, turnover for salaried managers dropped from 52% to 35%, and turnover for hourly managers dropped a whopping 64% (111% down to 47%).

HR pros often wonder if we should share succession plans with employees in case something doesn’t work out and it demoralizes them. However, in this case, all of the employees know that they are eligible for leadership positions if they are willing and able to put forth the effort.”

Those are some surprising statistics.

And Yes There Was an Incentive…

Now, those of you who actually went out and read the post will surely come back and say – “Wait, they gave managers an incentive to develop employees.  There WAS an incentive.”

You’d be right.  But the incentive wasn’t focused on turnover.  Most companies would look at their turnover statistics and say something like – “We need to give employees a reason to stay.  Give them money/gift cards/merchandise/free hair coloring – whatever.”  And they would probably have wasted their money.

The point is that Chipotle provided something other than an incentive to reduce turnover – they provided advancement opportunities.  They provided better management.  They provided a path – a vision – a direction to employees.

We can argue whether they even needed the incentive for managers.  I think I would have tried this without the incentive since in most retail food stores managers are paid a bonus based on the financial performance of the store and turnover reductions with the numbers quoted here would have surely impacted the managers’ income (again, I know – an incentive.)

The Net-Net

Don’t assume an incentive is your best solution out of the box.  Look for the other reasons people have difficulty achieving the goals you want for your organization – training, communications, and process – BEFORE you look for points and prizes.

Related articles

• My Warning About New Incentive Research Foundation Study (i2i-align.com)
• New Curriculum Module and Webinar on Science of Rewards and Recognition (enterpriseengagement.org)
• Tangible Awards Vs Cash – Again! (i2i-align.com)
• Should You Run an Incentive Program? Free Download. (i2i-align.com)
• Incentive Compendium 9-1-2011 (i2i-align.com)
• Incentives You Can’t Keep May Be More Effective (i2i-align.com)