When defining your incentive activty, it’s tempting to try and get instant performance results, such as increased sales. But this can result in a degree of short termism, and may only be applicable to certain staff or participants.

Direct behaviour such as increased sales, or reduced costs, are easy to measure, but unless other things change there is likely to be a limit to how far these performances can be improved.

Indirect behaviours are one or more steps removed from revenue generation or cost savings. Examples of one-step removed behaviours might be to increase the number of leads, or improved customer support, things that will lead to more or greater business in the future.

Long terms goals are used to drive the core values of the company, and enforce a positive company culture. Measures might include improving employee satisfaction, enhancing the public reputation of the organisation, or increasing market share. The benefits to the bottom line are long-term but profound. Ultimately the DNA and success of the company will be a result of the long-term behaviours. Rewarding long-term goals means identifying and communicating behaviours which contribute towards them.

Are you rewarding direct behaviours, indirect behaviours, or longer term goals?

Ideally you should reward across all three.

Over at the Compensation Force blog, Ann Bares groups the measures of an incentive plan into 3 categories, Lead Measures, Operating Measures, and Lag Measures. She defines a lag measure as reflecting success that has already happened, generally recognised through accounting practices, such as stock price. Bares continues: “Running an organization solely on the basis of lag measures is like steering a boat by watching its wake.”

Are you rewarding achieved success or future growth?

‘What gets measured, gets managed’, runs the old business guru homily, usually meant to justify a draconian and intrusive Taylorist workplace snooping.

But there’s no point in measuring if you are not going to then promote and reward quantifiable improvements. We call this Performance Engineering.

Setting measurable performance targets means identifying the behaviours you want to change, the costs you want to save, the sales you want to generate, or some other metric.

Setting a general goal such as “increase sales” may work for a focussed mobilised sales force which has the initiative to think of ways to do so, but sales teams that lack initiative will often only be able to achieve this goal by working harder, increasing their volume of sales calls, and hoping that this generates additional business. Raising the bar without giving staff the tools to reach higher can be demotivating.

A smarter approach is this scenario might be to supplement the main ‘sales volume’ incentive with a number of more focussed ‘side bets’, targeting particular behaviours, for instance, rewarding additional incentives for cross-selling, or up-selling, increasing the yield per sale than the volume of sales. This puts less strain on sales teams to make more calls, but gives them a focussed activity to convert bigger wins.

It’s important to communicate what you’re doing. This isn’t a scientific experiment where you don’t want the subjects of the experiment to modify their behaviour whilst they are being observed. It’s more like engineering where you can adjust the parameters and observe the results, tuning the performance for maximum result. Users like to know the rules of the game, that result X brings reward Y.

The beauty of an incentive system like iD-points is that you can run multiple incentives at the same time, and set them up quickly. As well as a baseline reward campaign, add short-sharp-shock campaigns that target particular behaviours, and rapidly build a picture of what drives performance within your organisation.

To summarise, the principles of Performance Engineering:

• Choose your metrics carefully.
• Target specific activities.
• Reward performance gains.
• Communicate what you’re doing.
• Run short campaigns.
• Tune parameters to maximise performance gains.

As this article in the New York Times explores, companies are looking for employees who are willing to keep developing over those who think their abilities are fixed.

People with a “fixed mind set” generally believe that they were born with all their talents and abilities preset.

In contrast people with a “growth mind set” believe that they can develop their talent and abilities. According to Stanford psychologist Carol Dweck, the people “who believe that talent can be developed are the ones who really push, stretch, confront their own mistakes and learn from them.” [See diagram here].

Dweck believes that these traits apply especially in the workplace. It’s not necessarily a good idea to hire the best and the brightest, who tend to be idealistic and egotistical. Instead, organisations should look for individuals with the growth mind-set, who are most willing to push themselves, and be part of a greater whole.

The article cites the experience of Scott Forstall, the senior VP at Apple who was responsible for putting together the development team for the iPhone.

Forstall identified a number of superstars within various departments at Apple and asked them in for a chat.

“At the beginning of each interview, he warned the recruit that he couldn’t reveal details of the project he was working on. But he promised the opportunity, Ms. Dweck says, ‘to make mistakes and struggle, but eventually we may do something that we’ll remember the rest of our lives.’

Only people who immediately jumped at the challenge ended up on the team. ‘It was his intuition that he wanted people who valued stretching themselves over being king of their particular hill,’ Dweck says”

Is it possible for people to ‘phase-shift’ from a fixed mind-set to a growth mind-set?

This is an area where we believe that rewards and the science of motivation can reinforce teamwork and instill growth mind-set behaviours, helping individuals push themselves further, rather than taking the safe route.

Promotions and salary raises will reflect abilities and talents over the long term, but rewards and incentives can drive performance and encourage the ‘growth mind-set’ with rapid results.

The example of an incentive program on The Incentive Markeing Association website, is a dog.

“Stan supervised a group of 50 people. He did a little research and came to the conclusion that each employee used an average of 10 sick days per year. He felt this seriously cut into productivity on the assembly line and he figured that cutting this figure in half, or 5 days per year, would greatly improve production figures for his department.”

The aims of the incentive might be laudable – to improve productivity – but the solution chosen – to improve attendance and reduce sick days – tackles only the symptoms, not the cause. Note that Stan spends no time trying to find out or understand why employees are taking so many sick days.

So Stan kicks off his little incentive “with a small party of donuts and coffee” – the best aspect of the incentive, incidentally – and, lo, in this fictitious scenario, gets the results he is after. But of course his incentive also punishes those who are genuinely sick, and may also encourage people to come to work who should really be at home, thus possibly spreading more illness. No mention is made of staff in other departments who are not part of the incentive – a divisive strategy that may affect the overall attendence levels and productivity of the business.

The biggest trap Stan’s incentive falls into is to award attendence, not performance. Those that turn up to work have no additional incentive to work harder or smarter, or otherwise perform better. Stan has replaced absenteeism with presenteeism.

The incentive also offers nothing beyond the reward, except the impromptu recognition ceremony. There is no attempt to engage the staff in a dialogue about performance, teamwork, and attendence.

Stan has also given himself a nasty admin overhead. Not only does he have to calculate which employees to reward, from the attendence records, which is not too much of an issue, but he has had to “put together a catalogue of gifts” in an appropriate price range. Not only that, he’ll have to deal with collecting the orders, arranging delivery, and dealing with any issues regarding faulty items, returns, stock availability, plus irate employees who will complain that there’s nothing they like.

Plus he probably has to put together a report, and maybe try and calculate the ROI from his incentive. Stan has got some long evenings with Excel ahead of him.

The article concludes that “Stan decided to run a similar incentive program the following year”, but here’s a crazy idea Stan. Why not try offering free coffee and donuts first thing every morning, and ditch the rest of the incentive?

If Stan’s company is serious about improving productivity, it needs to come up with a company-wide incentive solution that does more than just reward. It should find some one to run it for them, and free Stan’s time up to focus on what they are trying to achieve, and how to use rewards to drive staff engagement.

As reported in this recent BBC news piece, as many as four in ten employees are considering quitting their job in the next year, according to YouGov research for Investors in People.

“A lack of motivation at work is cited as a major problem, with unreasonable workloads, feeling underpaid and a lack of career path being blamed.”

Employees feeling detached, unsupported and with no clear direction are symptoms of poor communication, leading to de-motivation.

“De-motivation was highest within larger companies, the report said, with 39% of people in organisations of 5,000 or more saying that they were either not very or not at all motivated compared with 30% in organisations of between 50 and 250 people.”

Employee motivation is not just good for morale, it’s good for the bottom line, both in terms of productivity, but also because hiring staff is an expensive business. It costs many times more to recruit and train good staff than it does to retain them.

Any successful motivation and incentive activity has to have, at its heart, communication. Rewards are a means to generate attention, and open a channel of communication. Giving rewards without communication is meaningless and in the long run won’t improve employee motivation or performance.