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.

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:

My Right Foot

There's nothing like an injury or illness to teach you some life lessons. Here are some things I learned recently when I temporarily lost some of my independence.

Favors, Payback, and Thoughtlessness

Someone at work who isn't particularly a friend or foe has asked you for a favor. What happens if you say no? Do you grant the favor? How do you decide what to do?

Mitigating Outsourcing Risks: I

Outsourcing internal processes modifies the usual risk configuration of those processes, but it also creates a special class of risks that are peculiar to the outsourcing relationship. What are some of those risks and what can we do about them?

Business Fads and Their Value

Fads in business come and go, like fads anywhere. In business, though, their effects can be so expensive that they threaten the enterprise. Still, the ideas and methods that become fads can have intrinsic value. Where does that value come from? Where does it go?

Guidelines for Sharing "Resources"

Often, team members belong to several different teams. The leaders of teams whose members have divided responsibilities must sometimes contend with each other for the efforts and energies of the people they share. Here are some suggestions for sharing people effectively.

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

Forthcoming issues of Point Lookout

Coming April 1: Incompetence: Traps and Snares

Sometimes people judge as incompetent colleagues who are unprepared to carry out their responsibilities. Some of these "incompetents" are trapped or ensnared in incompetence, unable to acquire the ability to do their jobs. Available here and by RSS on April 1.

And on April 8: Intentionally Misreporting Status: I

When we report the status of the work we do, we sometimes confront the temptation to embellish the good news or soften the bad news. How can we best deal with these obstacles to reporting status with integrity? Available here and by RSS on April 8.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenmhXARWRMUvVyOdHlner@ChacxgDmtwOKrxnripPCoCanyon.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 words in your inbox in one hour. License any article from this Web site. More info

Public seminars

The Power Affect: How We Express Our Personal Power

Many people who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about this program.

• A recording of a program presented June 29, 2017, Monthly Webinar, sponsored by Technobility Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.