Problems with group incentive programs

Is long-term growth being sacrificed to maximize short-term return? Are workers unable to collaborate effectively? Is the organization so rigidly hierarchical that employees are intimidated about making recommendations and feel powerless and burned out?

Each of these situations calls for a different response. But relying on incentives to boost productivity does nothing to address possible underlying problems and bring about meaningful change. Moreover, managers often use incentive systems as a substitute for giving workers what they need to do a good job.

Treating workers well—providing useful feedback, social support, and the room for self-determination—is the essence of good management. On the other hand, dangling a bonus in front of employees and waiting for the results requires much less effort. Indeed, some evidence suggests that productive managerial strategies are less likely to be used in organizations that lean on pay-for-performance plans. As Jone L. Whenever people are encouraged to think about what they will get for engaging in a task, they become less inclined to take risks or explore possibilities, to play hunches or to consider incidental stimuli.

In a word, the number one casualty of rewards is creativity. Excellence pulls in one direction; rewards pull in another. Tell people that their income will depend on their productivity or performance rating, and they will focus on the numbers.

Sometimes they will manipulate the schedule for completing tasks or even engage in patently unethical and illegal behavior. As Thane S. The number one casualty of rewards is creativity.

Consider the findings of organizational psychologist Edwin A. When Locke paid subjects on a piece-rate basis for their work, he noticed that they tended to choose easier tasks as the payment for success increased. A number of other studies have also found that people working for a reward generally try to minimize challenge. Rather, people tend to lower their sights when they are encouraged to think about what they are going to get for their efforts. Do rewards motivate people?

They motivate people to get rewards. If our goal is excellence, no artificial incentive can ever match the power of intrinsic motivation. People who do exceptional work may be glad to be paid and even more glad to be well paid, but they do not work to collect a paycheck. They work because they love what they do. What is far more surprising is that rewards, like punishment, may actually undermine the intrinsic motivation that results in optimal performance.

The more a manager stresses what an employee can earn for good work, the less interested that employee will be in the work itself. The first studies to establish the effect of rewards on intrinsic motivation were conducted in the early s by Edward Deci, professor and chairman of the psychology department at the University of Rochester.

By now, scores of experiments across the country have replicated the finding. As Deci and his colleague Richard Ryan, senior vice president of investment and training manager at Robert W.

Baird and Co. Deci and Ryan argue that receiving a reward for a particular behavior sends a certain message about what we have done and controls, or attempts to control, our future behavior. The more we experience being controlled, the more we will tend to lose interest in what we are doing.

If we go to work thinking about the possibility of getting a bonus, we come to feel that our work is not self-directed. Rather, it is the reward that drives our behavior. Other theorists favor a more simple explanation for the negative effect rewards have on intrinsic motivation: anything presented as a prerequisite for something else—that is, as a means toward another end—comes to be seen as less desirable.

Freedman and his colleagues at the University of Toronto, confirmed that the larger the incentive we are offered, the more negatively we will view the activity for which the bonus was received.

Whatever the reason for the effect, however, any incentive or pay-for-performance system tends to make people less enthusiastic about their work and therefore less likely to approach it with a commitment to excellence. Outside of psychology departments, few people distinguish between intrinsic and extrinsic motivation. Those who do assume that the two concepts can simply be added together for best effect.

Motivation comes in two flavors, the logic goes, and both together must be better than either alone. But studies show that the real world works differently. But these managers fail to understand the psychological factors involved and, consequently, the risks of sticking with the status quo. Contrary to conventional wisdom, the use of rewards is not a response to the extrinsic orientation exhibited by many workers. Rather, incentives help create this focus on financial considerations. When an organization uses a Skinnerian management or compensation system, people are likely to become less interested in their work, requiring extrinsic incentives before expending effort.

Swarthmore College psychology professor Barry Schwartz has conceded that behavior theory may seem to provide us with a useful way of describing what goes on in U. Promising a reward to someone who appears unmotivated is a bit like offering salt water to someone who is thirsty.

Collaboration Leads to Innovation. Individual incentives are good in situations where there are clear performance expectations, such as production environments where minimal interaction among teams is required and tasks are autonomous and repetitive. But successful organizations are highly innovative, and innovation requires teamwork for the development of new ideas.

Team-based incentives create, as well as emphasize, the need for collaboration across the company. Such incentives benefit organizations by being:. Moreover, group incentives create stronger bonds among teams. Individuals have less desire to work the system when rewards primarily come from working together. Teams will want to keep their eyes peeled for recognition opportunities via performance, and that makes stretch goals more likely to be reached.

Beware the Red Flags. Remember, team incentives fail if individual incentives are layered like a cake. Most people prioritize the individual incentive over the team one every time, if only because they have more control over the outcome. The point is collaboration; so incentives must be designed to reward the group. HR managers must be vigilant in making sure that what they want is supported by the incentives they offer. Marshall is the principal of Primed Associates , an innovation consultancy, and a contributor to the Innovation Excellence blog.

Quick Links:. You may be trying to access this site from a secured browser on the server. This will help ensure that your top performers will give it their all, resulting in high-level group performance, while simultaneously rewarding stellar individual work.

This can help encourage friendly competition and increase productivity and motivation without creating resentment. Lisa McQuerrey has been a business writer since In , she launched a full-service marketing and communications firm. McQuerrey's work has garnered awards from the U. Costs must be weighed against benefits to determine which approach is most suitable for the particular organization and its goals.

Flexible Benefits Systems. A typical fringe benefit package provides the same benefits—and the same number of benefits—to all employees. As a result, individual differences or preferences are largely ignored. Studies by Lawler indicate variations in benefit preferences. For instance, young unmarried men prefer more vacation time, whereas young married men prefer to give up vacation time for higher pay. Older employees want more retirement benefits, whereas younger employees prefer greater income.

Although certain problems of administration exist with the programs, efforts in this direction can lead to increased need satisfaction among employees. We have seen a number of different creative solutions to the compensation dilemma. Which approaches are most effective in motivating employees? This is obviously a difficult question to answer. However, one way to get relevant information on this question is to see what corporations actually use. One such study asked major employers which of a variety of approaches had been used with a high success level.

The results are shown in Figure. As can be seen, skills-based compensation, earned time off, and gain sharing all received high marks from personnel executives, although other programs are also widely supported. It would appear from these results that many approaches can be useful; the choice of which one to use would depend upon the circumstances and goals of a particular organization. Whatever incentive plan is selected, care must be taken to ensure that the plan is appropriate for the particular organization and workforce.

In fact, a simple test of the effectiveness of an incentive plan would be as follows:. If a new or existing pay plan can meet these tests, it is probably fairly effective in motivating employee performance and should be retained by the organization.

If not, perhaps some other approach should be tried. On the basis of such a test, several specific guidelines can be identified to increase the effectiveness of the programs. These include the following:. As shown in Figure , both types of company can be effective as long as their reward systems are congruent with their overall approach to management. The incentive program should be consistent with the culture and constraints of the organization.

Where trust levels are low, for example, it may take considerable effort to get any program to work. In an industry already characterized by high levels of efficiency, basing an incentive system on increasing efficiency even further may have little effect, because employees may see the task as nearly impossible. Finally, incentive programs should be carefully monitored over time to ensure that they are being fairly administered and that they accurately reflect current technological and organizational conditions.

For instance, it may be appropriate to offer sales clerks in a department store an incentive to sell outdated merchandise because current fashion items sell themselves. Then, with this understanding, a program can be developed and implemented that will facilitate goal-oriented performance. Fringe benefits Vary according to organizational level Cafeteria—same for all levels Promotion All decisions made by top management Open posting for all jobs; peer group involvement in decision process Status symbols A great many, carefully allocated on the basis of job position Few present, low emphasis on organization level Pay type Hourly and salary All salary Base rate Based on job performed; high enough to attract job applicants Based on skills; high enough to provide security and attract applicants Incentive plan Piece rate Group and organization-wide bonus, lump-sum increase Communication policy Very restricted distribution of information Individual rates, salary survey data, all other information made public Decision-making locus Top management Close to location of person whose pay is being set What are the differences between individual and group incentives?

What is the variety of reward incentives available to organizations? How do managers and organizations use incentives and rewards effectively to secure the best possible performance from employees? Flexible benefits allow employees to choose the fringe benefits that best suit their needs. A good reward system 1 is closely tied to performance, 2 allows for individual differences, 3 reflects the type of work that is being done, 4 is consistent with the corporate culture, and 5 is carefully monitored over time.

Instructions: Think of your current supervisor or one for any job you have held, and evaluate her on the following dimensions. Think of a current or previous job, and evaluate the source and quality of the feedback you received from your supervisor. When you are through, refer to Appendix B for scoring procedures. Instructions: Think of a current or previous job. With this in mind, answer the following questions as accurately as possible.

What would your manager say to you if you came up with the idea of traveling with Justin Timberlake on tour for an entire year? This would not just be a work from home agreement but an actual out of office plan for one full-year sabbatical.