Illusory Incentives

Incentive programs usually work less effectively than we hoped, and sometimes less effectively than we believe. Rarely do we measure incentive effectiveness, and if we do, the measurement is problematic at best. Still, some practices related to incentives are probably counterproductive, and it's easy to find ways to improve. Here are some insights that might help improve incentive programs.

Motivational power isn't proportional to market value

We tend to ascribe a "motivational power" to incentives that's roughly proportional to the monetary value of the incentive. Generally, a trip to Hawaii is believed to have greater motivational power than an iPod.

But motivational power isn't necessarily proportional to market value. For instance, an employee with a chronically ill child might not be able to take a trip to Hawaii — ever. Moreover, some incentives have emotional power but almost no economic value — like the Peabody Awards.

Parallel incentive programs sometimes interact unfavorably

Many incentive programs have parallel threads that interact outside our awareness. Interactions occur when people are eligible for more than one incentive. For instance, "if you win this, you can't win that." Some organizations have policies prohibiting sequential wins.

These effects can demoralize. Winners of incentives from which others have been disqualified can feel that their awards have been cheapened. The resulting benefits the organization was hoping for might not materialize.

Spacing recognition awards makes them more effective

The effects of recognition awards don't accumulate, like say, money, because the effects of two awards are reduced when they occur close together.

Recognition has powerful, positive impact. But for recognition events to be distinctive, leave some space between them.

Let the work define award periods

In many organizations, all awards have the same "period of performance," synchronized to the calendar or fiscal year. This practice increases the chances of interactions, and might not make sense for people assigned to longer-term projects that overlap years.

Motivational power isn't
necessarily proportional
to market valueTry staggering the periods of performance to limit interactions, and to allow for equal recognition of contributors to long-duration projects.

Incentives can actually have negative value

Incentives can actually demotivate. For instance, designating only one "Engineer of the Year" or "Manager of the Year" can be demoralizing when, year after year, we must pass over many important contributors, who might see little prospect of justice ever being done. When some efforts are considered "primary" and others "secondary," the chances of winning awards for secondary activities are usually small, or they seem small to most employees.

Summing the total effects of all demoralization, the "X Person of the Year" award might actually have a net negative effect on overall productivity.

However powerful incentives are, they don't change firmly held beliefs. Only the believers of the beliefs can do that. If you doubt this, try changing others' beliefs about incentives.  Top    Next Issue

Are your projects always (or almost always) late and over budget? Are your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around. Read 52 Tips for Leaders of Project-Oriented Organizations, filled with tips and techniques for organizational leaders. Order Now!

Your comments are welcome

About Point Lookout

Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.

This article in its entirety was written by a human being. No machine intelligence was involved in any way.

Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.

Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.

Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.

Related articles

More articles on Personal, Team, and Organizational Effectiveness:

Personal Trade Secrets

Do you have some little secret tricks you use that make you and your team more effective? Do you wish you could know what secret tricks others have? Here's a way to share your secrets without risk.

Obstacles to Compromise

Compromise is the art of devising an approach acceptable to all parties. A talent for compromise is rare. What makes finding compromises so difficult?

Finding Work in Tough Times: Strategy

If you're out of work and discouraged — or getting there — you're in great company. Better than ever before. Getting back to work starts with getting to work on finding work. Here's a collection of strategies for the job of finding work.

Patching Up the Cracks

When things repeatedly "fall through the cracks," we're not doing the best we can. How can we deal with the problem of repeatedly failing to do what we need to do? How can we patch up the cracks?

Six Traps in Email or Text: II

Collaboration requires communication. For many, communicating often takes place in email and text message systems. But much of the effort expended in communication is dedicated to resolving confusions that we created for ourselves. Here are four examples.

See also Personal, Team, and Organizational Effectiveness for more related articles.

Forthcoming issues of Point Lookout

Coming July 16: Responding to Unwelcome Events

Unwelcome events have two kinds of effects on decision-makers. One set of effects appears as we respond to events that have actually occurred. Another set manifests itself as we prepare for unwelcome events that haven't yet occurred, but which might occur. Making a wrong decision in either case can be costly. Available here and by RSS on July 16.

And on July 23: Microdelegation

Microdelegation is a style of delegation in which the delegator unintentionally communicates the task to the subordinate in such detail and so repetitively that the subordinate is offended. As a result of this delegation style, many subordinates feel distrusted or suspected of fraud or goldbricking. Available here and by RSS on July 23.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenaXXxGCwVgbgLZDuRner@ChacDjdMAATPdDNJnrSwoCanyon.com or (650) 787-6475, or toll-free in the continental US at (866) 378-5470.

Get the ebook!

Past issues of Point Lookout are available in six ebooks:

• Get 2001-2 in Geese Don't Land on Twigs (PDF, )
• Get 2003-4 in Why Dogs Wag (PDF, )
• Get 2005-6 in Loopy Things We Do (PDF, )
• Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, )
• Get 2009-10 in The Questions Not Asked (PDF, )
• Get all of the first twelve years (2001-2012) in The Collected Issues of Point Lookout (PDF, )

Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500-1000 words in your inbox in one hour. License any article from this Web site. More info