An incentive program is a practical and effective way to apply the law of effect and improve human performance. The law of effect states that behavior with a favorable consequence tends to be repeated, while behavior with an unfavorable consequence tends to disappear. So, an incentive program aims to change behavior by managing its antecedents and consequences. It establishes direction and clarity of assignment. The management team asks how it can help employees do a better job. From there, it determines new performance objectives, standards, and completion dates. Additionally, an incentive program would provide examples of the quality that is expected for each individual. Essentially, it provides the foundation on which individual and group performance can be developed (Manning 2014).
Crucially, an incentive program engages employees to increase productivity (Forward Focus n.d.). To maintain high performance, one must want to perform at one’s best, know the essential behaviors that lead to success, as well as apply principles and practices to perform those behaviors (Manning 2014). An incentive program is designed to stimulate that sequence. When a company energizes employees to perform at their peak, it benefits the bottom line (Forward Focus n.d.).
On the other hand, poorly devised incentive plans run the risk of decreasing moral which causes productivity to plummet. One element of a poorly devised incentive plan is inconsistency as it is difficult for employees to understand what behavior is appropriate versus not allowed. Also, if the incentive program is too rigid, it may cause employees to fear or hate authority and feel anxious or overly guilty about making mistakes. Instead, a managerial principle to encourage innovative ideas that keeps new products coming is to facilitate flexibility (Manning 2014).
Worker recognition is acknowledgement of behavior that supports the organization’s values and goals. If someone exercises good work habits, the person will be rewarded both financially and personally as it becomes clear that one is a valuable asset (Manning 2014). It is important to give worker recognition in a timely fashion so that the association between stellar behavior and reward is clear (Manning 2014). Organizations develop statesmanship, entrepreneurship, and innovation by rewarding desired behaviors (Manning 2014).
I found a paper that estimated social effects of incentivizing people in teams. In three field experiments featuring exogenous team formation and opportunities for repeated social interactions, the authors found large team effects that operate through social channels. In particular, assignment to a team treatment increases productivity by 9%-17% relative to an individual incentive treatment, even though the individual incentive yields a higher private return. Further, the authors concluded that, in a choice treatment, individuals overwhelmingly prefer the individual incentive to the team incentive, despite the latter being more effective. These results are most consistent with the team effects operating through guilt or social pressure as opposed to pure altruism (Babcock et al. 2015). The study can be applied to people’s comfort level being “called out” in front of their peers in that it would be generally beneficial for someone to receive public worker recognition more so than private worker recognition, due to a lacking of pure altruism, but humiliating to receive public constructive feedback because there would be guilt and social pressure in the air.
The constructive feedback should be framed in a supportive context so that the employee feels as though the management truly wants him/her to succeed and is cheering the person on. In order to establish a collaborative context from the beginning, the management team can ask the employees questions. Then, from the beginning, the management needs to focus on listening to the employee and maintain that mentality throughout the talk. The management can also lead by creating a context that avoids negative emotions. Then, the management and employee need to obtain agreement that a problem exists. At the same time, it is crucial to put attention towards preserving the employee’s human dignity throughout the process. One way of doing so is for management to focus on the facts to keep the evaluation objective and concentrate on the behavior rather than demeaning the individual as a whole. The management should give feedback is nonjudgmental and actionable. Above all, it is important to tailor the setting to the unique needs of the employee at hand (Manning 2014).
References:
Babcock, Phillip, Gary Charness, Heather Royer, Kelly Bedard and John Hartman. 2015. “Letting Down the Team? Social Effects of Team Incentives”. Journal of the European Economic Association. 13(5): 841-870.
Forward Focus. Year (n.d.). “Constructive Feedback for Managers: Giving Feedback Effectively.” Forward Focus. YouTube. Nov. 27, 2016. Video, 5:06. https://www.youtube.com/watch?v=gi5UfSIf0BM
Manning, George. 2014. The Art of Leadership. New York: McGraw-Hill
Comment by Paul Hamilton:
Mary,
Thank you for sharing the paper on the results of incentives based on team efforts versus individual. The study had some interesting results that I would argue point out that incentives for the long term are not effective and alternative method should be found. The study paid $2 a visit to the library and a bonus of 25$ for exceeding 4 visits. The bonus paid was paid out differently for the study depending on team or individual to measure the effects of incentives on groups. (Babcock et al. 2015) As a result the largest reason people went to was for the money. It was not to improve the operations, help their or develop their relationship with their partners.
Due to what the paper was measure if did not follow up on what happened once the pay incentive was removed. I would argue that once the money was removed only those already with the behavior to go to the library would continue. If the incentive was money then why not just increase the workers wage to get the results all the time? If increase in money drove behavior then this should solve it. Not really, because of that the baseline was increased to the incentive level and remove the influence to achieve more. Making the incentive program less expensive on the company until all employees changed then the cost would be the same of an overall pay increase. Then to get those people to improve would more money have to be offered to continue the process? Where does it end if the driver is self serving instead of helping a coworker succeed?
Babcock, Phillip, Gary Charness, Heather Royer, Kelly Bedard and John Hartman. 2015. “Letting Down the Team? Social Effects of Team Incentives”. Journal of the European Economic Association. 13(5): 841-870.
Comment by Professor Robert Gnuse:
Mary, good post and use of the source materials to support the claims. Many have learned that poorly devised incentive plans have actually decreased productivity (negating the intended effect). Interesting article regarding team rather than individual incentive goals. People can be selfish in their personal incentives which is why utilizing a common goal may best serves groups (the whole instead of just the individual). I have also seen programs set-up to where a group trigger goal must be met before individual incentive goals kick-in and pay-out.