- Do incentive programs improve work performance?
- Can incentive programs have unintended consequences?
I have mixed feelings about incentive programs. I am a self-starter who believes that a job well done is its own reward. Ironically, I benefited from an incentive program. After graduating from high school, I got a summer job at a steel mill to earn money for college. My first task was a busy- work job, moving sprockets from one side of a room to the other. The job was supposed to take the entire day. I did it in three hours. The supervisor came in at noon scratched his head and said, well, move them back this afternoon and I’ll figure out what you’ll be doing tomorrow.
He assigned me to (what was known as} a piece-rate job which was an incentive program. He reasoned that if I worked that hard without an incentive, how much more would I produce with one? This is how this incentive program worked: after producing a certain number of products, the quota, I received 25 cents per unit in addition to my hourly rate. The more units produced over the quota, the more money I made. That gave me an incentive to work faster. The quality control/safety inspector reviewed my work to ensure product quality and safe working conditions. I didn’t always appreciate that person’s role because it slowed me down. Looking back, I believe those inspections ensured product quality and customer satisfaction, and my well-being as an employee. This was a win, win, win outcome.
Leaders have to consider all aspects of incentive programs from the vantage points of all stakeholders (management, employees, consumers, and possibly stockholders). Employee of the Month incentives are designed to motivate employees to perform better. The person who receives the acknowledgment is happy, but sometimes it creates resentment among his or her peers. A bonus is a nice surprise the first time it is given. However, they can morph into an expectation. Employees can be demotivated when anticipated bonuses are not given. Performance could then become lower than before the first bonus was issued.
The tools used to drive incentive programs are often referred to as carrots and sticks. The carrot is the reward for achieving a desired goal and the stick is the punishment meted out if the goal is not met. The Wells Fargo cross-selling scandal is a case in point. The financial institution wanted its product sales force to encourage clients to increase the number of accounts held with Wells Fargo. When employees could not reach their targets, management put pressure on them. Even with the added pressure employees could not reach the targets so they started adding bogus accounts to customer accounts and charging associated fees. Company profit was management’s sole concern. Employees were fired when the fake accounts were discovered, and the financial organization was sued for millions. After it was determined that top-down pressure caused the problem, top management was dismissed also.
As mentioned above, when considering incentive programs review from all stakeholders’ vantage points to ensure the desired outcome. Don’t just manage, lead no matter where you are in the hierarchy.
What type of work performance incentive programs would you consider to increase productivity?