I2I - Incentive Intelligence

The First Thing You Need To Know - Where Are You? – zappos Knows - Part III of III

 

  

The 3rd (and final) in the 3-Part Post (Part I and Part II) on zappos and their reward and recognition practices.

 

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My conversation from the very generous Jamie Naughton, “Cruise Ship Captain” at zappos morphed from a single post to this three-part behemoth.  Normally I pride myself on being able to condense complex ideas down to a pretty cogent 500 word post.  I thought I could do the same with my fairly brief chat with Jamie (just a smidge over 45 minutes) but I was wrong.  

Just as I was wrong about my feeling that they had more incentives than most would think.  They don’t.  They have much more on the recognition front than the incentive.  In truth, Jamie could only remember one that I referenced in my last post.

So where do you as a reader, employee engagement practitioner, incentive and reward professional (or anyone, including my family who reads this blog out of a misguided sense of loyalty) go from here?  

How can you use this information within your company?

It’s About Where You Start

I think my bottom line learning after my conversation with Jamie is that it’s not about what zappos does.  Or what your nearest competitor does or what ACME Rocket-Powered Skates does.  None of that really matters.  What matters is where you are on the “culture” scale with your company.  What matters is what “fits” with your company.

Look at the chart below.

 

  

If you have a strong culture you can probably get away with almost 100% of your efforts focused on recognition versus incentives to manage, maintain and grow business.  zappos, by virtue of their focus on the 10 core values has a titanium culture – it’s in everything.  They don’t need to use incentives as often or to the degree most of us do.  They have an employee population so dialed into what is the social norm of zappos it’s not a matter of getting people to do things – it’s a matter of keeping up with the things they do.  

However, if you’ve got a very toxic or poor culture you going to have to resort to using incentives most of the time in order to get something done.  In the middle, well you probably can get by with a split.

Baby Steps, Bob – Baby Steps

What About Bob Clip @ Yahoo! Video

While I know that there will always be companies that are in the far left part of the chart I’d like to think most leaders would like to be on the far right.  But how do you get there?

Simple – start where you are and begin dialing the incentive down and the recognition up.  You can’t do it all at once.  Like the movie “What About Bob” with Bill Murray – it takes baby steps.  

Take a look at your mix of incentive versus recognition.  Does it seem out of whack?  If so you probably have a poor culture (or if you don’t it will soon be – too much reliance on incentives creates it IMHO.)

Assess your culture – do you have one?  Do you want one?  Can you find a culture that is YOU?  If so you can then begin to reinforce behaviors through recognition that exemplify the culture you want.  Over time this becomes the social norm for your company and the backbone for your culture.

Creating incentives now and then to guide specific, short-term behavior is fine.  Just don’t make it your primary tool for reinforcing behavior.

Bespoke Programs

When I started this series of posts I said I was “adjusting my fit” – what I meant by that is in the past I would have argued fairly strongly that every company needs incentives and you can’t reach your objectives as an organization without them.  

I don’t believe that any more.  

I will make allowances for companies that CAN be successful without them.

I’m adjusting my position to now say that each company falls somewhere on a continuum between Glengarry Glenn Ross and zappos.  

Each company will have a different mix of incentives versus recognition.  

There is no perfect “one size fits all” recommendation.  There may be a company that can grow and be successful without any incentive programs (zappos may be as close as we get.) I have to allow for that possibility now.  

When developing a strategy to influence behaviors within an organization there is no off-the-shelf solution.  

Each company is different and each company requires a bespoke program.  That's how you ensure the perfect fit.

Recognition and Rewards – The zappos Way Part II of III

Continuing my thoughts on the conversation I had with Jamie Naughton – “Cruise Ship Captain” at zappos… See intro post here.

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Doing it Different – Almost Wrong?

The net-net for me after listening to Jamie talk about the engagement initiatives at zappos is this…

A strong culture, recognized regularly, decreases the need for specific performance-based incentives.

Again – I’ll caution all who read this site – zappos is an outlier – a positive deviant.  We should learn from them but don’t get up next Monday and implement everything they do without the proper foundation.  What zappos has done is different because it started different.  But, we can learn a lot from their approach.

First of all – they do have incentives…and they have recognition… and they have merchandise awards.

Incentives, Recognition, Zollars and Swag (Oh My)

At zappos they have created a reward currency called “zollars” (not sure the exchange rate with Shrutebucks) that is redeemable for logo-identified merchandise from their company store.  Yep – you heard me right – logo-identified merchandise.  I know I’ve gone on the record saying that you shouldn’t use logo-id’d stuff and to make sure you expand your award choice for participants (assuming you help with the decision architecture – too much is as bad as too little.)  But remember, zappos is an anomaly – you’re probably not.  Zappos is in the press and in the minds of consumers (think Apple, think Starbucks) they have a brand people WANT to be associate with and therefore logo-identified awards make a lot of sense.  Bragging about your company is great.  The fact that there are too few companies to brag about isn’t.

So zappos uses “zollars” as their award currency redeemable for logo-identified merchandise.  That’s their main platform.

Zollars are distributed by Managers and employees.  They choose.  No real written rules for how those zollars are distributed.  Or should I say no ADDITIONAL rules outside the 10 core values.  Each employee, each manager knows those core values and issues rewards to those that demonstrate behaviors that reinforce those values.  It’s pretty simple to do this stuff when you have a strong foundation no?

I asked if the CEO Tony Hsuieh was eligible to receive zollars.  Jamie said of course – he’s an employee too.

After The Fact – Not Before (Most of the time)

99% of the time employees are rewarded after that fact – meaning there is no “do x get y” mentality.  There is no expectation of reward.  In other words – it’s a Dan Pink world at zappos…  

Except when it’s not.

Lest we think that zappos is superhuman they do have some “traditional” style programs and some traditional style rewards.  

Specifically…

Time Card Incentive

Jamie mentioned that they had a need to increase the accuracy of their time-card stamping – people weren’t clocking in and out and it was causing problems.  So they ran an incentive – clock in on time and get some zollars.  Pretty much the “do x get y” thing – but tied to a specific, short-term, repeatable and “non-creative” behaviors (again, you’d know this if you were reading this blog all along.)

So there are some “normal" incentives running around zappos world. 

Employee Bonuses

In a world where cash bonuses have been listed with spam, pyramid schemes and other duplicitous business practices (and all that is wrong with the economy) again zappos does it different.

They do use cash bonuses.  

They don’t however, give them to just Senior Execs and they don’t need board approvals or SEC oversight.

EVERY employee at zappos has the ability to give a cash bonus to ANY employee based on what they see as exemplary behavior in support of the company’s core values.  Can you image that?  Every employee… cash bonuses… to other employees.  It’s almost inconceivable (and I do know what that word means.)  Each employee gets $600 per year to distribute to fellow employees.  They can dole it out piece-meal to various employees or go lump-sum to one person.  Their choice.

Just some side math for those like me… 1,900 employees times $600 = $1.4 MILLION in cash in the hands of their employees – and distributed based on their recommendation.  I know a lot of companies that wouldn’t trust their employees with $10 in petty cash for paperclips let alone allow them to give cash bonuses.

Now, being the rather cynical guy I am, I did ask Jamie if this gets out of hand?  Do employees simply start rewarding each other willy-nilly in order to take advantage of zappos’ largess?  The answer was no.  The employees at zappos don’t want to devalue the awards so they actually have fairly high standards for how one can earn these bonuses.  It goes back to their values.  

You can’t live the values if you rip off the company with non-earned cash awards.  Just not possible.  And although it wasn’t addressed in our talk, I’m sure the managers and other rank and file employees would put a stop to it if they saw it happening.

zappos Service Anniversary Program

Service Anniversary Program

Yep… the traditional program rewarding time at the company is alive and well at zappos.  I was actually a little surprise that it was.  They, as you would expect by now, do it a bit differently.

First, there is no “award” per se – no crystal bowls.  Service anniversaries are celebrated loudly and publicly and with special “license plates” – yep.  License plates.  Jamie told me that each employee get’s a “paper license” plate that hangs from the ceiling over their cube when they start (EVERY employee has cube – no mahogany office doors at zappos.)  At their first year they graduate to “metal” and then different stickers (not unlike your car registration stickers) are used to signify additional years of service.  

Think about it for a minute – when you walk the halls of zappos you can readily see who has experience and tenure with the company.  Does that happen at your company?  It is rare to see any outward sign of tenure at any company.  Here each employee can see who has been in the trenches and been around the block.  I’m guessing those with the most tenure also get the most requests for help.  It’s only natural to seek out experience and wisdom for help – and their service anniversary program would seem to contribute to that need.

To Net This Out…

Because zappos has a strong culture they can…

•    Run primarily on recognition with few “incentive” programs

•    Can use cash-based and non-cash-based programs without worrying about creating mercenaries

•    Use logo-identified awards versus standard “award catalogs”

•    Eschew traditional programs in favor of what works for “them.”

 

Zappos invested in their foundation which reduces their need to invest in transient programs and incentives du jour.

Now – how did that affect the way I look at incentives and rewards?  Three words – “Where Are You.”

That will be explained in my next post.

Adjusting My Fit… Courtesy of a Conversation with zappos – Part I of III

This is post 1 of a 3 post discussion with Jamie Naughton – Cruise Ship Captain at zappos.  Parts II and III will be forthcoming.  Part I is the setup and big picture, Part II is the specifics of some of the engagement programs conducted at zappos and Part III is where I “adjust my fit.”

 

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Every once in a while you need to adjust the fit of your thinking.  Often we can get into a talk-track that is hard to break out of and it get’s comfortable.  Too comfortable.  You need someone to give you a third-party opinion and provide some perspective.  

Think of the show “What Not To Wear.”  In most of the cases – the key to updating and invigorating the style of the show’s target is giving them an “experts” opinion.  That’s what Stacy and Clinton do.  They provide input (snarky sometimes but input nonetheless.)  For those that know me you already know that the only reason I am aware of Stacy and Clinton is because of my wife – you know it’s not ‘cuz I’m that into the whole style thing.

But advice is only half the equation – change is also dependent on the target’s willingness to “adjust their thinking” and consider the input they are given.  If they can’t break out of what is comfortable, they will never change – even if it is a little change.

That’s what I needed the other day.  And the wonderfully accommodating Jamie Naughton - “Cruise Ship Captain” at zappos - provided me with the needed “fit adjustment.”  Before we get to my “adjustment” let’s take a few paragraphs and get the real big picture out of the way.

Zappos…

For those just coming back from your walk through Tibet – zappos is the darling of the employee engagement world.  From $1,000,000 to $1,000,000,000 in sales in 8 years (yeah … that’s 10-fold), purchased by amazon in 2009 for over a billion dollars, raved about, talked about and referenced as the new gold standard in customer service.  And from my experience they deserve it.

I connected to zappos through a friend (@femelmed) who had a connection at zappos and I asked if she could introduce me to someone at zappos to talk about the way the reward and recognize their employees.  Fran shot out a note and within 15 minutes of her doing that I had an appointment set to talk to Jamie.  

Now – ask yourself this – how many $1 BILLION companies respond that fast to something as potentially dreary as talking with me?  Not many.  I’m impressed before even before we’ve talked.  That my friends, is customer service.  If that is how they treat lil’ ol’ me – you know how they treat their paying customers.  

I’ll say this right now – BUY from zappos.

My Goal…

I wanted to talk to zappos in order to understand what they were doing to engage their employees.  We all know about the wild costumes and the impromptu parades… but I figured there had to be more.  

I was secretly hoping there would be a bunch of traditional incentives programs driving performance with a layer of press-pleasing “engagement” activities as icing.  

And I was mostly wrong.  

I was hoping for more Glengarry Glenn Ross and got… dare I say it… Dan Pink.

It’s All About The Foundation

Jamie outlined a few of the various ways zappos engages their 1900 employees (1,000 in the KY warehouse and 900 in Henderson, NV.)  Approximately 400 are call center employees (about ½ the NV contingent) and the rest are split between Merchandising, IT, Administration, etc.    Jamie has been with zappos for almost 6 years and has been witness, and party to, the tremendous growth in their employee base.  Jamie noted that when she started working with zappos there was just a hair under 200 employees.  So she’s seen 10-fold growth as well.  

Zappos is Doing it Backwards – By Conventional Standards

So the question is – “How do you manage that kind of growth and keep engagement high?”

The answer is:  By having a strong corporate culture and hiring to that culture.  And most importantly – recognize to that culture.

Zappos is famous for their 10 core values and when Jamie and I were talking about them I jotted down a note to make this point…

Most companies create a mission and values statement on what they “want” to be known for and then hire for positions and hope they can convert the new hires to the values prominently displayed in the visitor’s waiting area of the company.  Zappos, on the other hand, created a mission/values statement based on what they “are” – and hired people to that standard.

Do you see the profound difference?  Zappos “is” something (driven mostly by Tony Hsieh in the early days – and then codified in 2006 or so.)  Zappos finds people that match them culturally – instead of just looking for skill sets.  The combination of skills and culture is what separates zappos.

Now I recognize zappos is an outlier – an anomaly.  

But as we’ve talked before on this site – driving performance requires that you look for positive deviants – those that are doing it different AND getting results.  Zappos is a positive deviant. 

It’s easy to say these things and much harder to do them.  Part II of this series will talk about some specific things done at zappos that prove they walk the walk.

So I’ll end post one of my three-post series with this quote from Jamie…

“You can have all the incentives, recognition and rewards you want, but they are worthless without a foundation.”

And that foundation is a ruthless focus on protecting the corporate culture.  I know it’s not news.  We can see thousands of tweets a day about culture driving performance.  But there is a big difference between saying you’ll go on a diet tomorrow and going on a diet NOW.

To quote management guru Elvis Costello…

But everybody is going through the motions
Everybody is going through the motions

Are you really only going through the motions?

Lip service is all you'll ever get from me
Lip service is all you'll ever get from me
Lip service is all you'll ever get from me

Zappos doesn’t give lip service.  

Next post – what specifically did I learn about zappos reward and incentive initiatives?

Rankings and Motivation – Why You Need to Read This Blog

I had a whole ‘nother post planned (or at least considered – it was all done, I just needed to write it) but I saw a tweet from @BobCorlett ths morning linking to an article on the Wharton site with this headline:

Ranking Employees: Why Comparing Workers to Their Peers Can Often Backfire

And this rather blunt conclusion:

“’Many managers think that giving workers feedback about their performance relative to their peers inspires them to become more competitive -- to work harder to catch up, or excel even more. But in fact, the opposite happens,’ says Barankay,…”

Those kinds of statements get my attention.  I know for a #fact that social norms, consensus and relative status DOES affect performance and behavior.  It has been proven (as much as any psychological/sociological theory can be proven) in many studies (see Cialdini Influencers here.) 

Let me recap the results:

• When given the choice of getting feedback on their relative ranking or not, workers chose NO feedback 3:1 over getting feedback.  
   
• In a second experiment to test whether workers who were shown rankings wanted to more work versus those that weren’t shown relative rankings, 66% of those that were NOT ranked came back for work versus 42% who were ranked.  The author then concludes that ranking decreases desire for more work.  Additionally, he noted that workers who were ranked were 22% less productive in future work than those that weren’t ranked.

Pretty interesting results and if taken at face value many companies and managers may start to question whether reporting relative rankings is an effective lever for influencing behavior.

But… I don’t think it’s valid…

Here’s why you need to read this blog – ‘cuz I read this stuff maybe a bit closer than the average bear.  If you read the study and look at the process they used to pick their study population you’ll see they used something called “Mechanical Turk.”  A description of this service from the article:

“His study involved 330 employees recruited via Mechanical Turk, Amazon.com's "crowd-sourcing" platform for work conducted and submitted online. Employers post jobs on the website's listings section -- most of which involve piecemeal, routine work, such as organizing photos, writing or editing text, and basic data entry. Prospective employees scroll through the list and select a task they want to complete.

When workers, also called "turkers," click on a job, they are led to a web page that presents a set of tasks. After completing the tasks, a worker can decide whether to continue on to the next job. The jobs typically pay $.03 to $.50 per task, and tasks usually take between a few minutes to an hour to complete. Among the companies that use Mechanical Turk are Google, Yahoo and Zappos.com, the online shoe and clothing purveyor.”

So… the big problem?

Relative rankings (social proof, consensus in other words) is a “social” behavior influencer.  In other words you need to be part of a social group (sales department in a company, sales in general as an occupation, etc.) In order for social influencers to work you kinda need the social thing – you need to identify with or connect with those that you’re being compared to.

This experiment, for all intents and purposes REMOVED the one thing that makes relative rankings work – the SOCIAL aspect of comparing performance.

Let me put it this way – 

I CARE if you compare my blog writing skills to other blog writers (especially if narrow it down to those that I follow and respect) 

I DON’T CARE if you compare my blog writing skills to a high-school English teacher who writes short stories on the weekend.  Why would I care?  He/she is too far removed from my identity for me to give a rip how well I compare.

That’s what the Mechanical Turk population is – a rag-tag group of people with no social connection that search for work online.  Who knows what their real skill sets are?  Why would Bobby in Alabama, who fixes cars for a living, care if he did a better job categorizing photos than Mary in Poughkeepsie, who is a social media maven?  There’s no connection – other than that specific, free-lance job – and that ain’t enough.  That’s transactional, not social.

The Key Learning?

• First of all – read these studies carefully and think about them for few minutes.  Invest some time in the analysis.
   
• Second… read my blog more often and recommend it to your friends (this reduces your need to do the first thing on this list)
   
• Third… if you have very disconnected people with very different backgrounds, identities and social groups – relative rankings won’t be a big influence lever.
   
• However, if you have a group of people who identify with each other and see themselves as similar in nature – relative rankings are still a very, very effective behavior influencer.

What do you think – is this a valid way to review this research?  

I care what you think and how I think relative to you.

“Because There Was A Box” – Filling in Forms and Grocery Carts – We’re not Rational

I don’t know how many times I’ve filled out forms – at banks, at doctors’ offices, when applying for a job and even when dealing with the government (I know you’re shocked there’d be paperwork in government).  I’m guessing you've filled out a few yourself.

If you have filled out a form let me ask this… did you find yourself coming across a box that really didn’t apply to you?  Or one where you really didn't know what they wanted?  Did you experience a bit of anxiety about it?

In other words, BECAUSE there was a box to be filled in, you (and me) felt like you HAD to fill it in (there is also another influence trigger at play here - authority - but that's for another time and post.) 

That box ruled our lives for that short period of time.  Our behavior was driven by that box.

Influence Through Environment

The Heath brothers (Made To Stick) addressed this type of issue in their recent book Switch.  In addition to managing the rider and the elephant (logic & emotion) they talk about managing the environment when trying to influence behavior.  The box on that form influenced your behavior.  It made you WANT to put something in it even if you weren't sure you should just because it was there.

Groceries and Healthy Purchases

Along the lines of the “box” on the form is a study done by Collin Payne, an assistant professor at New Mexico State University showing that adding a little “environmental” clue to shopping carts may help people make better decisions about the food they buy.  

(Although it pains me to say this as a dyed-in-the-wool Buckeye fan O H - I have to give a hat tip to Rick Walsh and his blog for finding and posting this.  He’s finishing his PhD at the University of Michigan.  Check out some of his thoughts here.)

Rick linked to a local New Mexico news site that reported on the study.  From that site:

"Researchers marked a line with yellow duct tape across the width of shopping carts, and placed a sign on the cart asking shoppers to place fruit and vegetables in front of the tape line, and the rest of their groceries behind the line.

'And what we saw was a bump of a 102% increase in purchasing of fruits and vegetables with that simple sign and line,' Payne said."

Yeah – 102% increase by putting a line in a cart.

It’s the box idea – put the line in the cart and people will put some vegetables in there to comply with the cart.

Your Work Environment

Think about your business and how these subtle environmental actions can increase, or change behavior.

From a wellness perspective I could see:

• Painted lines in the employee parking lot 100 yards from the entrance delineating a “healthy zone”
   
• A separate line in the company cafeteria that says “healthy line” (I don’t recommend another sign that says “fattening, high-cholesterol, suicide by food” line though.)

What about other areas behavior that could lead to greater employee performance?

• Links in email footers that ask if the sender wants to recognize the recipient for good work?
   
• A box on the review form that asks how often the employee wants to meet with their manager about performance goals?
   
• A place on every piece of paper/email that goes to clients with a check box that asks if they are satisfied or happy with their connection to the company?

I think you get the drift.  The environment we work in has a lot to do with our behavior and our engagement.  Look around your office and see what the subtle environmental clues are and how adding some "lines in the cart" could influence behaviors.

Think about it.

(Oh… and if you liked this post retweet it – I put a button below.)

Cash VS Non-Cash Awards – It’s not a Debate. It’s A Choice. A Lazy One.

The incentive industry has pushed the “debate” on whether a company should use cash versus non-cash awards to drive behavior.  The industry’s point of view is that non-cash (merchandise, travel, other awards) create trophy value, disconnect the award and the program from compensation, is more effective (less cost for same result) and creates an “experience” that is remembered long after the award is “consumed.”

And they are right.

Research shows that all these things are inherent in non-cash awards.

(BTW – I’m not just talking incentive industry research.  Research by Ariely and others have shown that cash creates a transactional relationship between the work and the reward.  Cash creates mercenaries who want more cash.  For some research check out... The Age-Old Question: Cash versus Merchandise?, Cash Incentives vs. Merchandise – The Pros and Cons, Cash vs. noncash awards, Cash or Non-Cash awards … and How Much Is Enough?  And some of my posts:  Non-cash and pay for performance, The Upside of Irrationality, Incentives vs. commissions. )

Proponents of cash awards always talk in terms of “choice.”  Cash is the ultimate in flexibility.  If you give out cash awards the participant can get any of the things that non-cash programs offer – PLUS – anything else.  Cash is fungible and universal (is that the same thing?)  From a planning perspective it is a “pure” incentive.  Everyone wants it.  No one ever has more than they want of it.  It’s is easy to manipulate and transform into what participants really want.

And to a degree they are right.

Cash is a Choice

The bottom line though, is the facts are the facts... 

Non-cash, for both the sponsoring company and the participant – are better awards.  Yet we still see the headlines about the “debate” around which is better (see post here from @globoforce for the post that sparked this thinking.)

There is no debate.  Let me be very clear and say that again.  

There is no debate.  There is only a choice.

Companies choose cash because of the following reasons – and it has nothing to do with driving behavior or building relationships.  

Companies choose cash because… wait for it…. They are lazy.  

The Path of Least Resistance

Sorry potential client A – if you’re thinking of using cash as an award don’t try to rationalize it from a performance standpoint.  Cash doesn’t compare.  

The reasons you’re looking at cash is because:

1.  Cash is the easiest thing to use in an incentive

The systems are typically in place to issue cash to employees or vendors or channel partners.  Accounting can cut a check to almost anyone with existing systems.  Most of your administrative work can be done through existing systems.  It’s easier.

2.  You don’t want to put up with the requests from the audience for cash 

Every program that uses non-cash as an award includes some portion of the audience that “wants” cash.  Heck we all do.  But the point of your program isn’t to give the audience what they “want,”  the point of your program is to find that balance between what your COMPANY wants and needs and what your AUDIENCE wants and needs.  Like most 3-year olds – they want ice cream for breakfast even though it may not be want they should have or what they need.  Cash is ice cream to your audiences.  They ALWAYS want it but it may not be the best thing for you, your brand and truthfully – for them either.  

Face it – you’re offering cash because you’re too lazy to have the conversation with your audience when this issue comes up.

3.   It is easy to promote

$100 is a $100.  Everyone knows what a $100 buys.  I can put a picture of Ben Franklin in an email, send it out and viola!  Everyone is motivated.  Promoting non-cash awards takes some skill and creativity.  Connecting performance and effort to something that could have a variable value to your audience means you might have to do more than one email, more than one mailing, more than one discussion.  You might just have to work a couple of angles because Participant A wants a TV and participant B wants a trip to Bali.  It’s harder to create a communication campaign that creates an individual visual of the award in everyone’s mind and connects their efforts to that award.  You’re doing cash ‘cuz you don’t want to do communication.

4.  Nobody got fired for buying IBM  

That was an old saw when IBM was the king of the hill in computer hardware.  Cash is the new IBM.  Your boss is motivated by cash (you know he/she gets a big bonus!) therefore, they think everyone else is motivated by cash.  You don’t want to have a long, intelligent discussion about cash vs. non-cash with your boss because it will end up making him/her seem irrational in their pursuit of the all mighty dollar.  As my Dad used to say – “if the boss likes green ties, wear green ties.”  If the boss thinks cash is best.  Use cash.  You don’t really want to be successful and impactful.  You just want to be good enough not to get fired.  Go with cash.  No discussion there.

So… 

Bottom line.  Cash vs. Non-cash isn’t a debate.  It’s a choice.  The easy one.

But one you shouldn’t make lightly (though most do.)

When Do Managers Stop Being Employees?

I design a lot of employee reward and recognition programs.  And if there is one truth that always surfaces during the analysis of the company’s past programs is that “managers” are not eligible for awards.  Oh, they are included from an administrative point of view but not in the “reward” process.

Typically the manager has the responsibility for “nominating” someone for an award, or reviewing the nominations from the “rank and file” or manages the budgets for the program in their department.  They also may play the role of “police” – checking to see why other employees are NOT using the program to recognize targeted behaviors, and in some cases, chastising others for using it too much.

But managers are typically excluded from earning awards.

Ecosystems – Honey Bees

Think about the world’s ecosystem.  Every creature, large and small has a role to play in keeping us alive.  (Don’t take my word for it.  There are many who worry that honey bees are dying out and the ramifications of that are big.)

Business Ecosystem – Everyone Is Important

Your company is an ecosystem.  All the players in a well-run organization have a role and purpose that supports the survival of the company - from the worker bees to the queen.  Keeping all those people working and engaged is critical.  Surveys and research have made it clear – rewards, recognition, progress, etc – are strong ways to drive engagement and performance.  So why are managers excluded from the reward and recognition equation?  Why isn’t the CEO eligible for a “peer-to-peer” recommendation?  For that matter, why can’t the temp in Accounts Payable send a recognition award to the CFO saying something about the way she helped streamline a process or procedure?

There is no reason.  

Except Hubris

Managers believe they are above the need for recognition.  Unfortunately, they are wrong.  Managers, CEOs, VPs (yes even the bastard VP of Sales who only looks at the spreadsheets – not the “intangibles”) needs recognition.  And the fact that they aren’t included in the program is probably one of the main reasons your reward and recognition programs don’t get the traction and the results you want.

How can the rank and file sign up for, and participate in, a program their managers don’t have first-hand knowledge of the effects it can have on performance?  Managers and Executives are the neediest in terms of recognition.  They, by virtue of position, culture, closed mahogany office doors or separate floors – are insulated from recognition.  They rarely if ever get it.  

And if they don’t get it – you’re surely not going to.  Their lack of inclusion seeps down the halls, the escalators and elevator shafts into the way the “employees” feel about the program.  Their experience with recognition drives the company's “culture of recognition” - or the lack of it.

Don’t tell me their paychecks serve that purpose – we all know we work for things that money can’t buy – like making a difference in the success of the company or the success of an individual.

Managers and Executives Are Part of the Recognition Ecosystem

Please – make it a point to include ALL employees in your company's reward and recognition program.  Include those that drive company cars and have the opportunity to do their business in a private loo.  They put their pants/skirts on just like everyone else – they just have free mouthwash on the sink counter top.  But they still need to be rewarded and recognized.

The Perfect 10 Incentive Program – Ask Dudley Moore

Dudley Moore starred in a movie a few years back (actually 31 years ago –whoa!) called “10.”  The movie documented the comic travails of Moore as he followed his “perfect 10” woman around the world.  Unfortunately, the vision of this perfect woman he had created in his mind died the moment he had the opportunity to consummate his fantasy.  The movie wasn’t Oscar worthy but made huge stars of both Mr. Moore and his co-star Bo Derek.  The image at right is now iconic and oft parodied.  You know you've arrived when you become a parody-worthy (keeping my fingers crossed.)

The point being is that there are no perfect “10’s.”  Whether in love or in your incentive program. 

Most companies keep trying however.  A good number of the programs I end up analyzing for clients are a klugy compilations of every piece of twitter advice pushed at them from the four corners of the blogsphere. 

Unfortunately, the end result in the pursuit of the perfect program is a Frankenstein monster with so many pieces, parts, bells, whistles and add-ons that most participants don’t, can’t or won’t even understand the rules.

Programs Don’t Work For Everyone

Amateurs in the program design space (and I count both client sponsors and some incentive practitioners) believe they can design a program where all the participants will participate, earn awards, be recognized and walk away with warm and fuzzies for the sponsor.

Not happening.

Programs – by definition are for the “audience” not the individual.  The goal of any program is to target a certain segment of the audience that can best influence the outcome of your particular business objective.  Only 1-on-1 management with individuals can truly get into the motivational space of each person – and that’s just not an efficient use of an overall incentive program (don’t misunderstand – both should be used but that is a much longer discussion – call me.)

A program is not a panacea for performance issues – but it is an effective tool for guiding behaviors when designed correctly.  But in the pursuit of the perfect “10” program most companies end up falling way short of where they could if they’d just heed these cautions…

Simplify, Simplify

David Thoreau had it right.  Find the simple solution – complexity breeds confusion.  Confusion breeds inaction.  If I don’t know what to do – I’ll do nothing rather than risk doing something wrong.  Find the core element/behavior that can drive your goals and focus on that.  Trying to reward everything in a program will not only create a measurement and management nightmare but reduce the overall effectiveness of the program.

Incentive VS Recognition

Understand the difference.  Running a program that rewards the top 20% is not an incentive program – it’s a recognition “program.”  These programs don’t create any motivation – except in the top 20%.  The day you announce the top 20% program 80% of your audience checks out.  They know who’ll earn the award before the second day of the program.  

And let me ask this silly little question – who has the most room to grow sales (or other metric) – those that are giving you their best every day (your top 20%) or those that aren’t?  In other words – your top performers probably are giving you all they got – their incremental increase in total will be less than the incremental increase from a larger group that isn’t doing all they can.  Focus where results can be had – not where results are already occurring.

Millions of Award Choices

Hey – I like choice too… but putting too many choices in front of people without the attendant choice-making support system is sure to cause choice paralysis.  Dropping a 1,000,000 item catalog – or a gift card – in front of your audience without helping them determine what they are working hard for is just too much.  Create a way for participants to build wish lists.  Create a connection between their effort and a real and imaginable outcome.  Just providing a slurry of award options creates too much noise and not enough signal.  How do you communicate with that set up?  “Earn awards for your performance.” Or … “Earn that big screen tv you want for the World Cup because I know you’re a big fan of Spain.”  Help your participants target their award choice – don’t just dump it on them and make them find the pony.

Work Toward a Perfect “5”

Like Dudley Moore in “10” – it all sounded so good at first but once he was able to attain his “perfect 10” he found she wasn’t.  

Same with your program.  Target a much more attainable and effective outcome by scaling back your expectations.  Shoot for a 5 – you’ll be happier and so will your audience members.

Wellness Incentives - Give or Take?

Four or five years ago I went to the SHRM conference in San Diego to launch a product for my old company (if you were there we were the guys with the Donald Trump look-a-like in our booth.)  While there I bounced around the floor checking out the booths.  There were a couple of companies touting their "wellness" incentives.  Not too many.  So back then it was a good idea but not quite mainstream.

Fast-forward to today and you can't swing a cat without hitting someone selling a wellness incentive idea.  Getting employees to care and act on their health is big business.  

Big but elusive.  The interwebs are awash in analysis and information on what will work and what won't.  Much of it contradictory.

(BTW - for a great resource and commentary on wellness communications check out my buddy Fran on freerangecomm.com - follow her site and her personally on twitter - she's good people.)

The Hard Truth

My own opinion is that wellness programs won't work long-term for a variety of reasons...

1. The personal health rewards (or penalties such as death) are typically far into the future so we discount them to almost nothing.  It is hard to be motivated to achieve a big award granted in the future when I can get a small, quick award today (ie:  that Big Mac or that cigarette.)  I posted on this phenomena here.
    
2. Companies in their heart of hearts really, really don't care about their employees' health - they care what affect their employees' health has on their bottom line.  Cash not compassion is their motivation - and employees pick up on it and dismiss the wellness program du jour.  The few companies that have senior leadership involved and invested in wellness are the ones succeeding.  Not just because they see a monetary benefit - but because they also care about their employees.  I posted on this here.
    
3. People will change if and when the majority makes changes.  Consensus and social proof are powerful influencers.  If the majority of the company isn't playing along - failure is assured.  Social network analysis has shown that weight gain actually follows your network.  If you have heavy friends in your network you are more likely to gain weight.  Weight becomes a norm for your group.  Health can work the same way. How consensus works in social networks was the focus of this post a while back.
    
4. Employees don't really have skin in the game.  I can run all the programs in the world - but if I don't really feel the pain of my behavior I won't make the change.  Most employees believe health insurance and the rates they pay are entitlements of the job (see post yesterday.)  Until employees have something to lose - they have no investment in the change.  It is sound psychology that people are more influenced by the potential loss of something than the potential gain of an equal amount.  In other words - increase their premium based on their lack of participation and you'll get more participation than if you give them a reward after the fact via incentives, rebates, merchandise, travel or good health.  It's just human nature.
    

What Would Incentive Intelligence Do?

Make sure that there is some compassion in the program.  If you're doing it purely for financial reasons there are other ways to cut costs - renegotiate the contract or get some other deal.  Increase co-pay, deductibles, whatever.  Spending money on a wellness program without caring is a waste of money.  If you don't care about your employees stop reading... the rest of the post won’t matter to you.

If you do care, start by honestly communicating the true costs of health insurance in your company.  People need to know the big picture and where they fit in that picture.  Your efforts with being transparent now will pay big dividends later - start the communication with honest, transparent discussions on what you're doing.  While costs aren’t the only thing you care about – employees need to know that their behaviors impact others and that their individual behavior important and will impact their co-workers.

Communicate that everyone starts at the same place and their future behavior dictates the outcomes.  The individual employee behavior will determine the individual’s premiums in the future.  And by extension, everyone’s behavior in total will influence the individual premiums as well.  I specifically mention behaviors - this isn't penalizing someone because of a fluke of DNA.  Diabetes can be a DNA issue or a value-meal issue - Doctors can separate the wheat from the chaff on that one.

Communicate that going forward you're changing the rules.  The employees need to know this won’t be a program of the month – this is a fundamental change in how the company will handle the health care issue.  Make sure the compassion is there - this isn't just a business decision alone - it is a human decision.  

Now, here’s where some of the psychology of loss aversion comes in...

Create a grace period before the real stuff starts where everyone’s premiums for the next six months will be at the lowest possible level for the plan in place.  This might mean the company takes a bit of a risk since you're only charging premiums as if everyone was perfectly healthy. But hey... you said this was a human decision not a bottom line one right?  You need to put your corporate money where your corporate mouth is too.  

After 6 months premiums will be adjusted and the company will adopt something like this:

Tiers of premium rates based on behaviors (example only):

• If don't or won't take a health risk assessment you pay the highest premium rate.
• If you take the assessment, regardless of the outcome, you get the second highest rate.
• If you get a bad assessment - you get the third highest rate.
• If your assessment is good - you get the fourth highest rate.
• If you participate in behavior modification efforts (diet, smoking cessation, etc.) You get your rate reduced.  Number and type of interventions would have more effect on how many tiers you move up/down.  This isn't about goals right now - just participation.  You need to break behavioral inertia.

Note On Strikethroughs:  See input in the comments section @akabruno caught some flaws in my logic. I was in a hurry and combined a couple of thoughts - the idea is that if you take the assessment you get a lower rate - the rate at this point isn't based on the outcome - just the fact you did it.  If you have a great assessment you won't have any issues later - if you have a bad one your level of participation will determine at what rate your premiums will be calculated.

This is only an example - the concept is to let the employees see the effect being healthy and doing healthy things has on their paycheck.  That’s the part where they get to see their skin in the game.  By reducing everyone to the lowest level – they now have something to lose - namely their own cash – if they don’t change behavior.  

Remember, you’re not really raising their rates – you’re lowering them for a period of time so they get accustomed to the extra money – then you’re taking it away based on their behavior.  

I know this is contrary to the normal program structure of giving awards for behavior but it should have a much greater long-term effect.  After all – how many pedometers can you really use?

And the big one…

Communicate, communicate, communicate the effect the program is having on people’s lives - not the cost savings, not the awards, not anything but the effect it is having on the well-being of your employees.  Remember, this is mostly about making your employees' lives better.  That is the thing you communicate.  

Leverage social proof - communicate the number of people playing the game to show how widely it has been adopted.  If you're getting low numbers then communicate the growth not the absolute numbers.  Whatever the situation, spin it so that the employee base sees this as part of your corporate identity.

That's it.  Simple and I believe, effective.  It addresses what I feel are the big stumbling blocks of wellness programs...

1. It’s based on things the employees can control
2. It comes from a compassionate and human place not just the CFOs office
3. It brings the impact and the motivation for being healthy from something in the future into the now - to things that influence me today - paying higher premiums next month if I don't do something (or lower if I do)
4. It applies the principle of social proof and consensus so I'm influenced to be part of the crowd.

What say you – is this structure better?  

Should we, as Nick Lowe said “be cruel to be kind” and focus on taking away money in the form of higher premiums for NOT doing something instead of giving out tchotchkes for losing a few pounds? (BTW – email subscribers may need to click through here to see video)

Interested to hear your thoughts.

The Only Thing Employees Hate More Than Micromanagement is the Absence of Management Protection

(this is a rant bear with me…)

To be honest – that headline is a rewording of the sub-head for an article on Slate yesterday.  The article’s real subhead is:  “The only thing Americans hate more than big government is the absence of government protection.”

When I read the headline – even before I read the article – I had substituted the words employee and management and it made a ton of sense.  And that is a real issue for those of us who make a living aligning company goals and employee activities.  

Jump out and read the article – I’ll wait.

Okay – you’re back.  

Before I get into my rant here’s the question on the table…

Do you think our employees are similar?  Do employees want total flexibility and freedom without the attendant responsibly those benefits require?

My thinking…

Entitled?

Many of the posts and articles that I read concerning employee benefits, salary, raises, rewards, bonuses, etc., seem to have a “entitlement without responsibility” patina to them.  Many talk about what employees deserve with no discussion of the flip side of that coin – what they need to do.  

We argue over whether we should increase health premiums for those whose behavior (not DNA) causes health issues.  We chew on whether to pay someone the same for “similar” work – not exact work.  We discuss and lament firing “older workers” in favor of “younger workers.”

Don’t get me wrong – I don’t believe in discrimination in the health, sex or age arenas.  

I believe in working hard and earning your keep.  If you’re 55 years old (male or female, smoker or non-smoker) in a marketing department and don’t know a thing about blogging, twitter, facebook, linkedin or this crazy thing called social media – expect to get pushed out.  

Not ‘cuz you’re old but because you’re stupid.  You didn’t do what was necessary to earn the benefits your organization offered.

Just because you’ve been there 20 years doesn't mean the company owes you a job any more than just because you’re a citizen of the United States you deserve a retirement account that keeps you in your Lexus lease.  If you eat until you weight 400lbs – and it’s not a “thyroid” condition – that’s not your cube-mate’s problem and it shouldn’t be.  You need to take responsibility for that behavior through higher premiums or by letting someone else be the Mayor of Burger King on foursquare.  

You want to be promoted and earn more money?  Get educated.  Volunteer for more work.  Research something your company needs (or you think it needs.)  Work for the promotion – not wait for it.  

Employee Responsibility

I think employees have grown accustomed to a level of support and benefits that most people in the world would love to get in on.  At the same time they don’t really want to be held accountable for mistakes, issues, problems should they take risks and try something.  They want the freedom AND a firewall in the form of their manager in case something goes wrong.

Believe me – I’m a big believer in risk taking and innovation.  But I also believe that as an employee I’d better take “calculated” risks versus just jumping out and doing something wild.  If I did that and got fired – would that be my fault or the company’s?  

I think too often, employees want their management to have their back regardless of the outcome.  They want to be able to fail – even if it is spectacular (thanks @seiden) – and have no ramifications.

I’ve worked for big and small companies and I know there are a lot (if not the majority) of employees who want the security of their positions without the responsibility for continuing to earn them.  

Continuing to earn your position is your responsibility.  

There is Mismanagement

Before you classify me as elitist - I also believe we’ve got a huge “management intelligence deficit” in this economy.  We've over-promoted based on seniority and functional expertise.  We now have managers who know how to do the job they USED to have and none of the skills needed to manage, motivate, align and engage people.  

We have great doers – not great leaders leading teams.  And I think that goes to the top of most organizations – not just middle management.

Net-Net

I know this is a rant but as we design and develop reward programs it is becoming increasingly more difficult to identify activities worthy of rewarding especially anything that isn’t considered “fair” (and what they mean by fair is “available to anyone regardless of effort/ability.)  I’ve had people say they can’t run a sales incentive program because people who AREN'T in sales couldn’t qualify for the award.

Really?  Yes.  Really.

When everything is an entitlement how do you design a program that will foster greater performance?  How do you encourage smart, intelligent people to continue to be smart, intelligent people when stupid, incompetent people get the same benefits?

Just thinking out loud today.