Attracting a fair amount of press coverage recently has been the publication of a book Scroogenomics: Why you shouldn’t Buy Presents for the Holidays by Joel Waldfogel. In it, Waldfogel argues against buying gifts at Christmas, suggesting that people consistently value the gifts they receive as less than their actual cost.

“When other people choose for us they do a poor job compared to when we choose for ourselves,” explains Mr Waldfogel, and calculates that “dollars on gifts for you produce 18 per cent less satisfaction, per dollar, than dollars you spend on yourself.” As an economist, Waldfogel views this as value destruction, to the tune of about $12 billion per year in the US alone.

There’s some interesting ideas here, and it’s tempting to think that it leads to the conclusion that cash makes a better gift choice than a present. However, studies have consistently shown that cash gets absorbed into satisfying needs rather than wants, making it harder to justify buying something they really want. ‘Buyers remorse’ is the name for the guilty feeling that people feel for treating themselves.

Waldfogel isn’t a total miserypants – “my beef is not with level of spending at Christmas but rather with the waste that this generates”, and acknowledges that presents, if well chosen, can actually add value,

Interestingly, Waldfogel proposes that giftcards could potentially be a less wasteful way of giving, if the amount that is wasted via non-redemption (euphemistically called ‘breakage’ by the voucher industry), could revert to charitable donations when they expire. But there is a greater chance of Christmas being cancelled before retailers adopt this practice,

We believe that our online points system iD-points provides the best of both worlds. It provides a mean for a recipients to choose their own gift, and get something they really want but without the buyers remorse that comes with cash. Recipients have no alternative but to treat themselves with great products from leading brands.

In an interesting presentation from the July TED conference, career analyst Dan Pink makes a convincing case that incentives are ineffective at enabling innovative thinking. This is something that social scientists know, argues Pink, but that business seems keen to ignore. Incentives are only effective at improving performance along already established paths, not in enabling the forging of new paths.

It’s an interesting presentation because it should force all operators of incentive solutions all to think about whether they are stifling the behaviours we are trying to promote.

There is a flip side to this, and this is the success of prize funds such as the X-Prize, or the Netflix recommendation engine prize.

Called the Netflix prize, a reward of $1 million dollars was offered by the movie rental company, to any team that could improve film recommendations that were 10% better than those produced by its current system. Earlier this year, a team managed to achieve this, after nearly 3 years and a massive collaborative effort. In fact, thousands of people entered the competition, many of whom would have had no chance of winning, but saw the opportunity to learn about machine intelligence with a state of the art set of test data.

So the question is whether the prize hindered the finding of a solution, or enabled it? Certainly Netflix has earned marketing and PR coverage and respect from the development community to more than justify the $1 million prize, but how many teams would have persevered if there had been no prize at the end of it.

Perhaps the answer lies in a blog post by one of the participants of the Netflix contest, Justaguyinagarage. In his post, Reflections on the Netflix competition, he gave kudos to Netflix for running the competition in such a well structured way:

“It was run in an exemplary fashion throughout and should, I believe, become the model for other competitions that people might choose to run. Some of the key features that made it such a success are:

a. A clear, unambiguous target and challenging target. How a 10% target was chosen, will I suspect, remain forever a mystery but it was almost perfect – seemingly unattainable at the beginning and difficult enough so that it took almost 3 years to crack – but not so difficult as to be impossible.

b. Continuous feedback provided so one could identify whether the approaches you were investigating were going in the right direction.

c. A forum so that the competitors could share ideas and help each other (more about that later).

d. Conference sessions so competitors could meet and discuss ideas.

e. Zero entry cost (apart, of course, from the contestant’s time).

f. A clear set of rules.”

As a set of guidelines for anyone looking to run an incentive, these could hardly be bettered. An objective, unambiguous target, a clear set of rules, feedback and discussion forums to promote knowledge sharing – these are surely the ingredients for successful incentives, whether the objectives are simply to sell more stuff, or something that requires creativity or innovative thinking.

For Dan Pink, the answer lies in what he calls “intrinsic motivators”, understanding peoples inner desires, which Pink subdivides into three categories: autonomy -”the urge to direct our own lives”; mastery – “the desire to get better and better at something that matters”; and purpose – “the yearning to do what we do in the service of something larger than ourselves”, which can be achieved giving employees more freedom to choose their own destiny. So is it possible to use incentives to drive people to achieve these goals? The Netflix prize would seem to show that it can.

As the Calvin and Hobbes cartoon goes: “I like to verb words.” says Calvin. “What?” asked Hobbes. “I take nouns and adjectives and use them as verbs. Remember when ‘access’ was a thing? Now it’s something to do. It got verbed. Verbing weirds (sic) language.” Hobbes commented “Maybe we can eventually make language a complete impediment to understanding.”

Incentives are rife with verbing, ie nouns turned into verbs. Hence giving a gift becoming ‘gifting’, creating an incentive becomes ‘incentivising’, just two examples of the horrible corruptions of the English language.

Part of this convolution of English is a deliberate attempt by incentive agencies to make the subject of incentives and motivation seem more elaborate, an arcane practice with secrets known only to the sorcerous experts. But it’s a sham, a cover up, a pernicious attempt to put distance between an ‘expert’ (the agency) and a lay-person (the client).

Be very wary about any company or organisation that starts banding around phrases like “empowering the gifting experience’ or “delivering incentivising opportunities”. At IncentiveDirect we try to talk straight, and aim not to bamboozle our clients and customers with a secret jargon.

Remember, “Language is a virus”, as William Burroughs once wrote.

As reported in the Observer, the British government is proposing to give a grant of £120 to pregnant women:

“All expectant mothers are to be given a one-off payment of around £120 that they will be encouraged to spend on fresh fruit and vegetables as a way of protecting their children from diseases and incurable conditions later in life.”

Not only is this totally misguided from a health and nutrition viewpoint, but from a motivational and incentives perspective it is hopelessly flawed.

“The payment – the first by a government that is allied to a specific health target – would be given to women when they are seven months pregnant. It would be linked to them receiving professional health advice on how to maintain a proper balanced diet, and give up drinking and smoking.”

Unfortunately, as it is a cash payment, it means the money could just as easily be spent on booze and cigarettes. Being a one-off payment during the seventh month of pregnancy will do little to counteract a poor diet in the preceding month. Fruit and veg might be good for you, but they are not a magical elixir that can undo years of poor diet. The Observer article continues:

“There is also little published research to show that a financial incentive, combined with nutritional advice, is sufficient to persuade mothers from the most deprived areas to change their lifestyle.”

This government badly need some advice on incentives. They need to understand that, as previously discussed, not only is cash a very poor incentive, but motivation comes from regular, sustained activity, not one-off payoffs.

What would be more likely to achieve the result the government want? A one-off £120 cash payment, or a monthly box of organic fruit and veg from a home-delivery box provider such as Abel and Cole, accompanied by supporting information and literature?

How much would you value not having to do a 2-hour round-trip commute to work?

Flexible working practices are gaining ground as the means of improving employees work-life balance and improving staff retention. Mobile telecommunications and cheaper laptop computers mean that knowledge workers no longer need to be chained to a desk.

But a study by the UK’s City & Guilds and Institute of Leadership & Management has concluded that many managers are suspicious of employees working from home.

As reported in Management Issues, managers may outwardly support more flexible working patterns:

“but scratch the surface and managers remain deeply unhappy about letting employees out of their sight, much preferring to manage a team that is physically sat there in front of them.

The research has found that, while nine out of 10 managers said they trusted remote workers and three quarters recognised they were more productive, a significant minority admitted they were still unable to break their old-fashioned “presenteeism” management style.

This was despite the fact that new technology was making remote working a much more viable option.”

As we have previously asserted, work is not somewhere you go, it’s something you do. Attempting to enforce mid-20th Century working practices based on Taylorist time-management principles is doomed to fail.

The old image of the ‘helicopter’ boss, hovering demoniacally over his staff, will give way to a more enlightened, assertive boss, using communication technologies positively to monitor performance and productivity, and engage with staff.

Incentives are an essential part of the new work economy, rewarding productivity, encouraging proactive behaviours, and helping staff set their own goals. Online systems such as iD-points can operate seamlessly across a distributed organisation, wherever it’s staff may be.

But these systems can also to build an element of community amongst users. Using the news feature to announce winners of monthly performance awards, for instance, is a good way to highlight the success stories of the company, and to emphasise a shared endeavour.

In 50 years time, the idea of a corporate office building may be as alien as a Victorian workhouse is to us today. The rules of engagement between staff and employers are changing. Heads-up companies will plan to promote self-sufficiency, look to hire self-motivated staff, and inspire them further with well structured, tactical incentive campaigns.

Remember, iD-points can be spent on IT equipment for that tricked out home office!

Work is no longer a place where you go, but something you do.

Stories of organisations using rewards as a means of reducing absenteeism, such as the scheme implemented for the Royal Mail, are usually heralded as demonstrating the power of incentives to change behaviour.

I’ve always felt a bit uneasy about this kind of incentive, and at first I though this was because it’s not rewarding a positive behaviour. But I’ve realised that the real problem is that it rewards attendance rather than performance.

An interesting article at Business Week looks at how American electronics retailer Best Buy has implemented a Results Oriented Work Environment at its’ corporate headquarters, judging people on their performance rather than the hours they are at work.

Work place productivity is a myth, generally based around paranoid management who believe they can’t control what they can’t see. But there are so many distractions in the workplace, from web surfing, dealing with e-mail fire-storms to water-cooler summits and office chair jousting, its possible to spend a day at work without getting any work done..

With ROWE, people are not only free to work when they want, but where they want. There are no mandatory meetings and no schedules, which leaves employees to manage their jobs around their lives, not the other way around.

“The official policy for this post-face-time, location-agnostic way of working is that people are free to work wherever they want, whenever they want, as long as they get their work done”

Many organisations are also realising that freeing their staff from their desk is a great way to reduce the requirement for office space:

“Sun Microsystems Inc. calculates that it’s saved $400 million over six years in real estate costs by allowing nearly half of all employees to work anywhere they want. And this trend seems to have legs. A recent Boston Consulting Group study found that 85% of executives expect a big rise in the number of unleashed workers over the next five years.”

With ubiquitous wireless networking, cheap laptops, and mobile telephony, the idea of commuting to a central office space to spend all day on the phone or computer terminal seems more and more archaic. The role of the office will doubtless change to a more informal, fluid zone for face to face exchanges and collaborative working.

Can a ROWE model also be applied to a retail environment or shop floor, where staff do not have the same flexibility of work patterns? Yes, according to Phyllis Moen, a sociology professor at the University of Minnesota, in this article:

“It’s not about being free to come and go,” she says, “but being free to come and go based on getting the work done, so covering the show floor will necessitate coordinating with others. It’s a revolutionary idea.”

Modern performance rewards and incentives will need to adapt to the new realities of the new workplace. With the work-life balance that ROWE offers, incentives will be used to target different behaviours, and assist in helping employees acheive their self-set goals.

Today’s business is about transparency.

A clever marketing ploy by UK sandwich-and-coffee chain Pret a Manger seems to me to epitomise the new ecology of business. On their website, on their takeaway bags, and now in a book, they provide the recipes and list the ingredients needed to remake their tasty food. It says: ‘Want to reproduce our chicken wrap? Here’s how’.

The clever part, of course, is that few people ever will. They’re giving away their secrets because it’s actually good for business. It provides a great marketing opportunity for Pret a Manger to tell the story of how much care goes into the preparation of their food, and the importance of carefully selecting the right ingredients. The subtle indication is that once you really know what goes into making a particular sandwich, salad or soup, they seem much better value.

But there’s another way in which Pret’s transparency is good for business, and that is because it sets their standards. With this marketing campaign, they are nailing their colours to the mast, and declaring their values. ‘This is how we do things’, it proclaims. It is a public commitment to quality and accountability.

This serves as a motivational aid to the staff across the Pret chain, to ensure they live up to claims made by their marketing, as well as an acknowledgement of the standards they have already achieved.

Motivation and transparency are at the heart of the new business economy. Defensive, paranoid organisations, crippled by a culture of secrecy and protectionism, will find themselves left behind both by customers, and an increasingly competitive recruitment market. People won’t want to buy from defensive organisations and they won’t want to work for them.

Our business is founded on meeting the needs of today’s agile business, not yesterday’s lumbering corporations. We’re happy to share the secrets of successful motivation and give tactical insights to running successful incentives, because we know it shows our strengths.

A new version of Hasbro/ Milton Bradley’s Game of Life boardgame offers other rewards than money.

“When it launches this summer, Hasbro, Inc.’s new THE GAME OF LIFE: Twists & Turns Edition will be the first major board game in America to replace cash with a Visa-branded card as the preferred form of currency. Visa will also provide financial literacy enhancements within the game to teach children and consumers of all ages the benefits of proper money management.”

But, more fundamentally:

“The winner is no longer the person who accumulates the most money, but rather earns the most “life points”, which is a combination of wealth and life experiences.”

It seems that even Hasbro have realised that cash is a poor incentive.

Incidentally, there’s a short history of Milton Bradley and the Game of Life on the New Yorker