Can Incentives Be Used If You Aren't Ready to Fire Someone?

Paul Hebert, my go-to-guy for all things incentive in this world, has a great post up at Incentive Intelligence about the types of things for which you should provide incentives. 

From PH's post:

"Incentives have two poles - rewards and punishment.  I can move your behavior based on providing an incentive or I can punish you for non-performance.   If you don't do what I want - there will be negative consequences.

I was wondering if this idea of opposing sides to incentives could be used to test the validity of an incentive and reward structure?  What if we re-frame the rules using the negative - and see if it still makes sense? 

If you wouldn't punish someone for missing a goal then maybe you shouldn't reward the same goal."

Think through that for a moment, and you'll find the exercise is more difficult than you think.  For example, Paul uses the concept of making a sale in his post as a basis for incentives.  We provide incentives for sales all the time.  Paul uses the test logic "Make a sale today (use this week/month depending on the cycle times for your product) or you're fired".

Would you make that blanket statement?  Probably not.  To Paul's point, there are too many things involved to let someone go, based on non-performance over a short period of time.

But that brings me pretty quickly to the related topic of performance management.  If you read this site, you know I am pretty strong-headed about doing performance management off a 3-point scale (Exceeds, Meets or Does Not Meet) rather than a 5 or 7-point scale.

The reason?  Simplicity, my friends.  I can bring an expert like Paul into the organization to assist me with structuring incentives.  But, the best way I can think of to make sure I get "bang for my buck" is to tie the incentive, even if it is short-term, to the "Exceeds" level of performance.  In that fashion, I'm using a short term incentive to reinforce how high the bar is to be an "Exceeds" performer.

That feeds the culture of performance, which is the goal of upstream incentive programs.  The danger is that you set the bar low enough that "Meets" performers get the carrot.  It's cool to be a "Meets", but incentives should be there for those who exceed and deliver extra.

The more people who get that, the better the performance of your organization.

Comments

[Frank Giancola]

KD,

Suppose you have a merit plan with a fund of 5% of payroll, how would you allocate the funds percentage-wise to the do-not- meet, meets and exceeds employees?

Also, how would you deal with employees who sometimes meets and sometimes exceeds? It seems like you need a category between the two highest.

Frank Giancola

[Jode]

You can try and try to train someone to be an HR professional but only some of us are able to deal with what people want and can make the most of what people want and.... only some of us can take that and make it something more and produce results even when the odds are against us. We can make our best feel great and we can make our worst realize that they need to achieve MORE!

[Kris]

Frank -

Your points are great counters to my argument for the 3 point scale. My take is that most managers, if given a choice between meets and exceeds, will often take the bailout choice. I think they take that choice much more often than is appropriate, because to say you are at a "meets" level often implies "average".

With that in mind, I'm an advocate for the 3 point scale because I think its the best way to push a higher percentage of your population to Exceeds performance. Of course, many things still have to happen since the system doesn't produce increased performance on its own. You need quality coaching, the willingness to coach, and measureable goals/observations.

The pay thing is tough. You have an across the board budget number, you're going to have to take away from the meets and the does not meet crowd to reward the Exceeds with higher percentages. That's hard for most managers to do, especially if they have not been doing much on the coaching side all year long.

Good thoughts. I have strong opinions, but admit the simple move to a 3-point scale isn't something that suddenly makes it all better.

KD

[Frank Giancola]

Kris,

I am an advocate of the three point scale, too. Others have raised the issues that I noted. I just remembered that one way to solve the problem of people who sometimes exceed and sometimes meet is to rename the categories as consistently exceeds and consistently meets.

Frank Giancola

[James Mason]

Kris, and everybody else:

That's the craziest thing I've ever heard. . .I think Frank's been staring too long at the pattern on his TV.

Put aside everything, just EVERYTHING we've learned, even theoretically, about motivation, incentive, and human psychology in the past fifty years (heck, the past, um, five, who cares?), and even on its face, that statement is, at least, wacky.

A carrot is a carrot is a carrot, but a stick is always, only, and just a stick. It can't be a carrot, no matter how much it looks like a carrot, quacks like a carrot, and smells like a carrot. If it smacks like a stick, it's a stick.

Quite apart from the moving toward and moving away hoo-hah, and the enthusiastic game-theory-like euphemistic blather engendered by namegame-playing with not-Plain not-English inherent in calling a not-Diamond a Diamond, at the end of the day, negative consequences or not, there just can't be a "Negative Incentive" no matter how much you play "Twist and Shout" with the English Language.

It sounds wrong, and it feels wrong, because it IS wrong. In the case of incentives with odours, it's just plain gonna SMELL wrong. in fact, I think I'm starting to smell it now.

You know, I've seen a lot of really nice dresses. I've even known a couple of really nice pigs. But no matter how nice the dress, no matter how nice the pig, you shove this little piggy in any that little dress, and you STILL have a pig in a dress.

And while I know that really worked for my good friend Warren, for most of the rest of us, that's really not much of an incentive.

Warm Regards,

James E. Mason