More Lessons from CARS: Making Group Incentives Effective

In yesterday's post I discussed the CARS research on group incentive plans, perhaps the most comprehensive research ever done on the topic, and some of the key findings from the first three CARS studies.

This post features the fourth and final study, CARS IV, which was kicked off in 1997.  CARS IV took a different and more focused approach than its three predecessors, using in-depth case studies of eleven group incentive plans in four different organizations to developer a richer understanding of what makes plans effective.

The results of CARS IV are covered in a WorldatWork Journal article, "Making Group Incentives Work", authored by CARS co-founders and directors Jerry McAdams and Elizabeth Hawk (Volume 9, Number 3, 3rd Quarter 2000).  In the article, McAdams and Hawk present seven key lessons gleened from the final CARS project:

• Design your plan well - but do a great job implementing.  Certain plan design features are more likely to get good results.  Yet this new research demonstrates that differences in local plant implementation and support drove incentive plan effectiveness as much as differences in plan design.  Therefore, having the right management in place is critical.  The plant manager and direct supervisors are the strongest drivers of a culture that supports effective incentive plans.  They need to establish a climate of trust and a supportive, communicative culture.
• Do not use group incentives to replace a well-thought-out and articulated business strategy.  Incentives only supplement and reinforce strategy.  Smaller organizations are at special risk here because the time needed for active strategic management may be in short supply.  The temptation to use the plan to manage the strategy may be high.  Resist.
• Ensure that the pay-for-performance message is reinforced by other systems.  Align group incentive plans with other HR systems - performance management, staffing, work design, training, organizational development - and the messages they send.  If, for example, you stress teamwork but measure and pay people solely on individual accomplishments, your systems are at dangerous cross purposes.
• Increase recognition to complement the group incentive plan.  Group incentive plans, by design, do not reward individual performance.  When it is possible and desirable to measure individual performance, combine group incentives with individual rewards delivered outside the group incentive plan.  This allows managers to reward for team effort and still differentiate individual performance.  Also, don't forget the power of recognition of teams and workgroups to spur performance.
• Make sure employees understand the measurements and what they can do each day to influence them.  If plan participants believe they can influence results and, therefore, payouts, they'll certainly try.  That's good for the organization as well as for employees.  However, it takes work to be sure employees really understand the measures and have the knowledge and tools to influence them.  Many industries have traditionally used the old "mushroom approach" with employees when it comes to the business by keeping them in the dark.  That simply won't work if the intent is to engage people in performance improvement.
• Communcate, communicate, communicate.  In successful incentive plans, managers keep communicating about the plan in good times and bad.  In good times, employees need to understand that incentive payouts are not an entitlement; they must improve their performance continuously to ensure payouts.  In times of poor performance, with small or no payouts, companies need to resist the natural urge to stop communicating about the plan.  Instead, tough times are an opportunity to reinforce what it takes to be successful, to be honest about any factors outside of employees' control that may have influenced plan results and to use concrete examples of what employees might do to help get performance back on track.
• Do not institute incentive opportunites at the expense of base salaries.  Most plant employees are not interested.

Reprints of the WorldatWork Journal Article are available through customer service at WorldatWork.  I am checking to see whether copies of the CARS research, or the executive summary, are still available for purchase; I will report here if I learn that they are.

Comments

[http://almostgotit.wordpress.com]

Another great post! I'm particularly grateful for the link to more info on CARS IV results... you'd inspired me to go Googling for them yesterday to disappointing result. Especially well-taken are your points that (a) it is important not to get at "dangerous cross-purposes" with individual and group incentives and (b) We should resist the temptation to allow the plan to drive the strategy! (psychologists call this sort of thing "magic thinking"!!) (Which is what I engage in every time I go to Target for all their nifty organizer thingies, hoping the thingies will do the organizing *for* me..)

And, of course, you are also spot-on that incentives should not be instituted at the expense of base pay. That is merely exploitative, and employees will recognize it as such.

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AB - Thanks for the comments and great observations. It is difficult to track down info on CARS - that's why I refer to it as a "best kept secret". I have my own dog-eared copy of the CARS I-III research summary, and have contacted WorldatWork (one of the sponsors) to see whether they have copies available. Will post on that availability when I learn more!