Incentives as Your Worst First Solution... & Switch

Today I'm channeling the smartness of my friend and fellow blogger Paul Hebert of Incentive Intelligence.  A recent post of his centered on a positively brilliant statement that anybody in the business of designing incentives (and who actually knows their stuff) should enthusiastically embrace:

Incentives Are Your Worst First Solution

That's right (and yes, I did tip my hand with the title).  It is always a mistake to respond to a performance issue by first developing and implementing an incentive plan.  Why?  Because the root of the performance issue is rarely, if ever, the absence of an incentive plan.  Ignoring the causes and contributions to the issue in favor of simply tossing a carrot into the mix rarely, if ever, solves the problem in a meaningful and sustainable way.  And more often than not, creates its own set of secondary problems (otherwise known as the unintended consequences).

What, then, should be your first response?  To get a better handle on the situation, including the current obstacles to the change you wish to see, as well as any "bright spots" where it may be already starting to happen.  And I found some good ideas and practical tips in a book I just finished, also based on a recommendation by Paul,  Switch by Chip and Dan Heath.

I agree with Paul that this is probably not the be-all-and-end-all of books on change and also that its authors do fall victim to the problem in so many popular business books today of presenting evidence to support their point without always acknowledging that which contradicts it.  All that said, I find it a wonderful resource for compensation professionals in that it helps us - in a very compelling, readable and story-driven way - appreciate and understand the factors involved in successful, transformational change.

And yes, I do still think incentives have a place here - and the Heath brothers themselves acknowledge the important role of rewards.  After, in the words of the authors, the destination and the roadmap there have been clarified, people have felt the need for the change, and the path has been appropriately shaped, we should be reinforcing success along the way and ultimately sharing the value of the victory that our collective efforts have created. 

Rewards play an important role in helping and supporting the well-scripted change effort; they cannot be the change effort on their own.

For more, check out Paul's video with the "money quotes" from Switch...

Switch Money Quotes

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Comments

[E. James (Jim) Brennan]

posted this over on paul's blog, too:

Gotta find that classic flow chart of Geary Rummler's on the Performance Model, maybe 30 years old by now or older. Anyone seen it recently? Dealt with those who simply CAN'T and those who just WON'T do what you wish.

Correcting Deficient Performance may have been an alternate title, since it starts out focusing on the performance deficiency and runs thru the entire cycle: properly communicated, understood, has done it before and demonstrated past proficiency, good timely/accurate feedback, no task interference, no competing tasks, adequate resources (time, cost, $, support) ... before eventually finally reaching the biggie... BALANCE of CONSEQUENCES where motivations and incentives are addressed.

Most issues are not solved by training or yelling about motivation but by the other points above, particularly those dealing with those who CAN do it but WON'T because ... (I'll skip the specifics but you all know them...)

Seems it was in my (first) childhood I learned the biggest problem with incentives is not that they won't work but that the DO work all too well. People only do what THEY find to be most rewarding.

[E. James (Jim) Brennan]

P.S. Paul H. was kind enough to post a link to a 12/8/2008 Business Process Trends Vol. 6, #21 report on Geary A. Rummler's passing that contained text of the Performance Model.

[Mario]

I did not find any new ideas in Switch and I'm surprised at its popularity. A better title would be Bait and Switch, since the ideas don't match the hype.

The best book on organizational change for me is Jack Welch's Straight From the Gut, in which he describes how he successfully transformed GE.

[E. James (Jim) Brennan]

Not surprised, because I'd bet the vast majority of folks today were not active in business in 1980 when Welch took over GE. That era is actually more antiquely remote to them than The Great Depression was to me.

[Ann Bares]

Jim:

Can you share a link to that model here?

Mario:

Interesting perspective. It's been awhile (maybe quite awhile) since I read "Straight from the Gut" but I don't recall being that impressed with it. Perhaps I should take another look. Or perhaps we just have to admit to having different takes - I find the framework presented in Switch to be helpful, especially for those of us in the reward field who are often tempted to focus too narrowly on incentives and financial triggers.

Thanks for the comments here!

[E. James (Jim) Brennan]

http://www.bptrends.com/publicationfiles/advisor20081209.pdf

I sent this to Paul in greatful reponse:

God bless you, thank you, thank you, thank you.... that IS it, but just not in the simpler flowchart branching into CAN'T and WON'T paths that I used to teach in my OD days in the 1970s. I could probably recreate it from those refresher cues. That version mostly simply lacks the options recommended when the answer is NO; and neither training nor rewards are usually useful corrective/remedial methods for those issues.

Bottom line, though: I had to spend my years as a compensation specialist before I had the credibility to be able to disprove and dismiss pay as the universal solution, so folks could get down to the REAL root causes of performance problems. Until you can eliminate compensation as the fast quick fix, you waste much money and solve few problems.

[Clive Wilson]

Sorry, Ann, I must agree with Mario on this one. I have read Switch and found little of substance there. The connection of the ideas with incentives is strained at best.

Clive Wilson, CCP

[Ann Bares]

Clive:

Thanks for weighing in. Interesting to hear others' takes. And I agree that the connection with incentives is light - but that's not what I liked about the book. I get involved in SO many situations where organizations are trying to solve performance/change issues with financial incentives that I really appreciate the framework that the Heath bros. offer for examining the roots and possible solutions to a problem outside the realm of pay.

Just my take.

Others?