Be Wary of Using Financial Incentives to Motivate


Part 2 of 5 on Employee Pay

I believe in “pay for performance.”  That is, higher performers deserve greater pay.

However, financial incentive and bonus systems often result in less performance plus other unintended consequences.

Psychologist Sam Glucksberg, in his famous candle experiments, predicted that cash awards would motivate teams to produce better solutions faster.  However, the opposite occurred.  Teams that had opportunities to earn larger cash awards actually took longer to complete their work.

A number of studies in actual companies show that financial incentives often lead to less, not more, performance.  Additionally, incentives may encourage jealously, turnover, and cheating.

In an effort to improve food quality, a large canning company offered bonuses to employees who found insect parts in their food products.  Guess what happened.  Employees started bringing insect parts from home, tossing them into the process and later discovering the parts and claiming bonuses.

For very repetitive work, incentive systems may actually increase performance.  But for assignments that require problem solving, incentives change the focus from “get the best solution” to “do what you have to do to get the award.”

What then is the best way to reward high producers?  How about just paying them more based on managers’ judgements?

The Five Toughest Personnel Decisions


Part 5 of 5

Helen, age 64, has been with the organization 33 years.  For most of those years, Helen’s performance was exceptional. “She lived and breathed the organization,” is the way a previous boss described her.

Helen has recently experienced serious family problems that have affected her health to the point that she is unable to adequately perform her job.  Helen says that she wants to work 10 more months and retire at 65.

The president said, “I’m in a dilemma, I feel sorry for Helen and I’m very grateful for what she has done for us.  Still, I’m not in a position to hire another person.  If Helen stays, others will have to take some of her work.”

“Could Helen take an early retirement?” I asked.

The president reported that he had suggested early retirement but Helen said that she would like to stay on until sixty-five if she could.

I say tell Helen and anyone else that you absolutely will honor her request.  Helen’s thirty-plus years of loyalty and productivity are surely enough to earn her another ten months.

When others complain about having to do part of Helen’s work, listen with empathy.  Smile and say, “I understand and I really appreciate what you are doing to help us out here.”

 

The Five Toughest Personnel Decisions


Part 3 of 5

“I’m at a loss about what to do about Margaret.” a manager said to me.

“What is the concern?” I asked.

“We hired Margaret about a year ago to manage a troubled group.  Although she has worked very hard, performance continued spiraling downward.”

“Were your expectations clear?”

“Yes, and she admits that she has fallen far short.”

“Did you give Margaret enough support?”

“Yes, we fully financed what she requested.  We met frequently and often agreed on needed changes.  For some reason, Margaret was unable to effect the changes or she took too long.”

“Were there unexpected challenges, things that blew up seemingly out of nowhere?”

“Not really, she had issues with a couple of employees and she had to replace a vendor but nothing too unusual.”

Margaret is an example of a good cooperate citizen who tried hard but was unable to achieve a tough goal.  There is a temptation to lower expectations and continue supporting hard working employees who do not achieve desired outcomes.

I believe, though, this is a case where the person just did not have the wherewithal to get the job done.  While it is heart-wrenching to remove a hard-working, committed employee, I think it would be better for all—including Margaret—to replace her and try again.

The Five Toughest Personnel Decisions


Part 1 of 5

A manager said to me, “I’m concerned about Jacob.  He has really struggled during the last few months.”

“How long has Jacob been with you?” I asked.

“Almost fifteen years.”

“What is Jacob’s performance history?”

“He’s been a pretty good performer, not great but reliable.  The volume in Jacob’s job has increased dramatically and we have become very dependent on technology.”

“Have you trained Jacob sufficiently?”

“Yes, we’ve offered extensive training.  In reality, the job has probably outgrown Jacob’s abilities.”

“Do you have other tasks that you could assign to Jacob?”

“Not really.  We are fully staffed and I’ve shifted tasks as much as I can.”

When a job outgrows an employee’s abilities, I think the company should try to reassign the employee to other tasks.  However, as in this example, reassignment is not always practical.

Another option is to continue coaching and training and hope to get the employee up to speed.  However, this usually does not work.

As tough as it sounds, the better option for both the organization and the employee is to compassionately remove the person from the organization and assist him/her in finding a better fit with another company.

 

Don’t Be a One-Trick Pony


The president selected Johnathon–a no nonsense, high-performer– to lead a low-morale team that had consistently missed performance objectives.

Johnathon announced to his team, “Your performance disappoints me.  You can do better.  I will change what I need to and I expect you to meet all performance metrics.  I will inspect all activities closely and take quick, corrective actions where needed.”

Employees grumbled, griped and blamed failures on unrealistic expectations, vendor problems, a warehouse fire, and bad weather.

Johnathon, anchored like a rock in a sandstorm, continued pressing.  He made changes, terminated a couple of employees, some quit.  The performance needle began vibrating upward.

After a few months, the president said to the team, “You have performed a turnaround beyond my highest expectations.”

Jonathon impatiently asked for even more from the team.  Turnover became an issue again, excuses emerged, and performance stalled out.  Eventually, the president removed Jonathon.

Johnathon’s methods jerked a group of carless whiners into a high-performing team, but he could not sustain the success.  Effective leaders are not one-trick ponies, they adapt.  Structure often turns bad performance into good, but support and freedom is necessary to sustain high performance.

I Am Your Leader; I’m Not Your Therapist


A manager, trying to find out why a good employee began coming in late, said, “You haven’t been yourself lately.  Is something wrong?”

“I’m having some personal problems.  It’s hard to keep my mind on work.”

“What’s going on?”

“My wife and I have not been getting along.”

“When I went through my divorce it was hell. Maybe you need to slow down on your drinking.”

“My spouse has gone on a spending spree. We are having financial problems.”

The conversation continued for another thirty minutes without a resolution.  The manager later explained that he was trying to find the root cause of the employee’s problem.

I think most managers’ fail when striving to find reasons why employees miss work or behave inappropriately.  Managers may even worsen the situation by giving bad advice or enabling dysfunctional behaviors.

Consider two ways to help employees get through a personal wreck.  One, show your concern by honestly laying out the consequences of their behaviors.  Two, encourage employees to visit your Employee Assistance Program where they can receive professional help.

No matter how well meaning, most managers make poor therapists.

My Top Ten Idiotic, Motivation-Killing Statements


businessman rating

Here are my top ten idiotic, motivation-killing statements.

If I gave you a “five,” you wouldn’t have anything to strive for.

You haven’t been here long enough to get a “five.”

I don’t give “five’s.”

HR requires that I write a justification if I give you a “five.”

Our policy discourages high ratings.

If I gave you a high merit increase, you would think you had it made.

Never let them know you are satisfied with their work.

Others might be envious if I gave you a big increase.

Yes, you did a good job, but this was a team success.

I know your attendance is perfect but we can always do better.

Effective leaders delight in awarding their best producers with high appraisals and merit increases.  The result is:  high producers strive even harder.

While lesser performers may publicly whine and whimper about their modest increases, they will learn that to get more they have to produce more.

Withholding rewards from high performers based on fear of losing commitment or upsetting slackers makes about as much sense as the late Yogi Berra saying, “No one goes there nowadays; it’s too crowded.”