Some years ago, Men's Wearhouse founder George Zimmer came to a class I taught to discuss a case study I had written on his company.
Zimmer commented on a bonus program I had written about where each store employee (except the store manager) would receive $20 if the store met its "good" sales target for the month, and $40 if it met its "excellent" sales goal. My students thought these amounts were quite small, but Zimmer thought the incentives were perfectly sized. They were large enough to provide some recognition of store achievement, he said, but more importantly, the payouts gave people a chance to celebrate success together without being large enough to distort people's behaviors.
Zimmer's insight that, in the case of incentives, less is often better than more is too infrequently embraced by leaders who instead seek to use substantial rewards to fundamentally channel behavior.
HR Managers and c-suite executives would do well to learn from Zimmer's wisdom. While most employees today assume incentives will be part of their job, how large they are and how they are presented can substantially impact an organization.
Incentives Can Undermine or Crowd Out Intrinsic Motivation
Beginning in the 1970s, studies in psychology found that providing people rewards—extrinsic incentives—could undermine intrinsic motivation for engaging in inherently interesting tasks. One theory suggested that people found incentives controlling, and rebelled against attempts to control their behavior. Another perspective suggested that people interpreted incentives as signaling that a task was inherently unpleasant, reducing their interest in doing it. The takeaway? Incentives have the potential to reduce people's motivation and interest in tasks.
Even economists, who have traditionally looked more favorably on incentives, have also argued that incentives can backfire. They argue that providing extrinsic incentives "crowds out" intrinsic interests in doing something. Consequently, incentives can backfire, and make it less likely that people will do what the incentives want them to do. For instance, one study observed that parents were more often late in picking up their children from a day care center when a fine was imposed, while yet other researchers observed that volunteers who were paid a small amount worked fewer hours than volunteers who were not paid. Here, the evidence suggests that using incentives to drive desired behavior may not work.
Consistent with the idea that smaller is better, smaller incentives will be less likely to crowd out or reduce intrinsic motivation because smaller incentives are less psychologically prominent and salient. For organizations concerned about maintaining intrinsic task motivation—which is probably most workplaces—the crowding out and undermining research provides one more reason to be cautious in the use of incentives.
Incentives Drive Behavior, But in Often Unanticipated—and Counterproductive—Ways
As Bob Sutton and I pointed out in our book on evidence-based management, a huge problem with incentives is that they are too effective at influencing behaviors. And most people and companies aren't great at anticipating how behaviors will change in response to incentives. There are enough examples of this to fill a book—or maybe several.
In 2018, William Dudley, CEO of the Federal Reserve Bank of New York, noted that "misaligned incentives contributed greatly to the 2008 financial crisis." In the scenario that Dudley is referring to, many mortgage brokers were compensated for the number of loans they made—not necessarily for making sound loans that would be repaid. And many of the incentives for mortgage brokers for senior financial industry executives were short-term rewards. Meanwhile, the assets being created (the loans) and the financial results were inherently longer-term. The time horizon on incentives needs to match the time horizon of the results being affective. Simply put, short-term incentives aren't going to be very good for creating long-term results.
How to Make Incentives Work
Based on extensive empirical evidence, there are some simple but important implications for implementing incentives in ways that aren't likely to cause misbehavior that adversely affects organizations.
First, and most importantly, keep incentives small enough to not overly influence behavior. That may seem counterintuitive—many workplaces implement incentives precisely to influence behavior—but, as noted, people are often quite bad at predicting the ways in which incentives may drive behavior.
Second, spend time trying to anticipate how people could achieve the goals signaled by incentives in ways that are harmful to the organization's interests and try to put up various guardrails to detect and deter such behavior. One way to do this, is to monitor how rewards are being received and the behaviors associated with them based on consistent conversations with employees who are benefiting from the rewards program.
And third, if incentives are driving bad behavior, don't do what many workplaces do, which is to try and solve an incentive-based problem by implementing even more incentives. Many companies try to use incentives to substitute for leadership (coaching and feedback) or a strong, positive organizational culture. As research going back decades from places like shows, leader behavior matters a lot in motivating performance and reducing turnover. Incentives are a poor substitute.
In the case of incentives, the inescapable conclusion is that less—less reliance, less use, less magnitude—is most often better than more.
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Taking A Company-Wide Approach to Learning & Development
There’s a lot of coordination that goes into a company’s learning and development programming, from identifying skills gaps and creating engaging content to scaling initiatives company-wide. And because there’s so much complex planning involved, organizations can sometimes get caught up in the details, and overlook how L&D fits into broader organizational goals. A recent survey—titled "The Revolution is Now: New-Skill Your Workforce to Catalyze Change"—from Cornerstone People Research Lab (CPRL) and the Human Capital Institute (HCI) found that only 55% of organizations believe their L&D programs are well-aligned with their company’s overarching strategy. But CPRL and HCI’s survey reveals two logical ways to overcome this challenge. First, there’s a need for L&D executives to participate in strategic conversations around organizational goals to ensure that L&D planning aligns with broader business plans. And second, it’s important to share responsibility for learning effectiveness. If facilitating continuous learning is a part of everyone’s role, it becomes easier to integrate it organization-wide. Promote Cross-Departmental Collaboration and Responsibility To better align L&D efforts with overarching business goals, learning executives have to participate in strategic conversations about organizational direction. For instance, when business leaders gather to discuss goals and KPIs for the coming year or quarter, HR and L&D leaders should be involved in those conversations. And the opposite is also true: Business leaders need to help direct the learning outcomes framed against those goals. According to the "Revolution is Now: New-Skill Your Workforce to Catalyze Change" survey from CPRL and HCI, only about half (51%) of learning leaders report being involved in these discussions. During these business planning discussions, it’s important to establish accountability, especially among people managers. CPRL and HCI found 67% of people managers report being involved in the creation of content, but only 47% are involved in the accountability for the results. By holding more people accountable to the success of L&D programs, it can be easier for a company to spot pitfalls or opportunities for improvement. It creates shared goals for measuring effectiveness, and establishes a process for making changes. For example, by getting people managers involved in L&D initiatives, L&D leaders can work with them to get a better understanding of a specific team’s skill gaps or what reskilling or new skilling solutions will work best for them. All leaders in an organization, in fact, should be eager to participate and own their team’s newskilling, reskilling or upskilling efforts. Ask a people manager in the IT department to reiterate the importance of learning to their team, and track the amount of time their employees spend on learning content. This approach will not only create a shared commitment to continuous learning, but can also help leaders outside of L&D and HR get a better idea of what content or formats work best for their teams and recommend adjustments accordingly. Continuous Learning Is Everyone’s Responsibility Aligning overarching business plans and strategy with learning and development efforts can improve each’s efficacy. The more cross-departmental collaboration that exists, the more information that HR and L&D leaders have about their workforce and its needs, strengths and weaknesses. And with more accountability, all stakeholders in an organization can become more involved in ensuring the successful partnership between L&D and a company’s overall strategy. To learn more about the findings from Cornerstone’s "The Revolution is Now: New-Skill Your Workforce to Catalyze Change" survey and its recommendations for using cross-departmental collaboration and accountability to help with L&D efforts, click here to download and read the full report.
Why supporting neurodiversity is essential for any successful workforce today
When we think of diversity in the workforce, we typically think of it along the lines of race, religion, sexual orientation or gender. But focusing only on those four is its own sort of constraint. To truly create a successful and diverse workplace, you need to ensure you're also embracing neurodiversity too. Understanding neurodiversity In the late 1990s, a single mother in Australia named Judy Singer began studying Disability Studies at University of Technology Sydney. Her daughter had recently been diagnosed with what was then known as “Asperger’s Syndrome,” a form of autism spectrum disorder. As she read more and more about autism as part of her studies, Singer also suspected that her mother, and she herself, may have had some form of autism spectrum disorder. Singer describes crying as she realized that her mother, with whom she'd had a tumultuous relationship throughout her childhood, wasn’t purposefully cold or neurotic as she had thought. She just had a different kind of mind. In her honors thesis, Singer coined the term “neurodiversity.” For Singer, people with neurological differences like autism spectrum disorder, attention deficit hyperactivity disorder (ADHD), or dyslexia were a social class of their own and should be treated as such. If we are going to embrace diversity of race, gender, religion, sexuality, etc., then we must embrace a diversity of the mind. The following video is an excerpt from the "Neurodiversity" Grovo program, which is available in the Cornerstone Content Anytime Professional Skills subscription. Neurodiversity in today's workplace Recently, neurodiversity has become a trendy term in diversity, equity, inclusion, and belonging spaces. And many organizations are working to hire more neurodivergent people, as well as give them opportunities to thrive at work. That’s why, at Cornerstone, we recently produced a series of lessons on neurodiversity. If your organization hasn’t prioritized neurodiverse inclusion yet, here are some reasons why it both supports your people and organization. 1) Neurodivergent people are underemployed Neurodivergent people, especially people with autism, are widely under-employed, regardless of their competence. In the United States, 85% of college graduates with autism are unemployed. According to a 2006 study, individuals with ADHD have higher rates of unemployment than individuals without. However, there is no evidence that neurodivergent people are less competent or less intelligent than neurotypical people. Organizations are missing out on talented people. 2) Neurodivergent people are more common than you may think Neurodiversity manifests in many different ways. It can encompass autism spectrum disorder, ADHD, dyslexia, dyspraxia, dyscalculia, Tourette syndrome, and many other conditions. And as scientists have learned more about what makes someone neurodivergent, they're identifying more and more people. According to the World Health Organization, 1 in 160 children have some form of autism spectrum disorder. The Centers for Disease Control and Prevention estimate that 1 in every 162 children have Tourette Syndrome, and roughly 8 percent of children under 18 have attention deficit hyperactivity disorder, or ADHD. And that's just children. How many adults, like Judy Singer's mother, have struggled their whole lives without a diagnosis? People who are neurodivergent are everywhere. Diverse organizations are stronger Diverse organizations and teams not only have better financial returns than less-diverse ones, but they also perform better. Having the different perspectives presented by people who are neurodivergent can help your team solve more difficult problems. Different perspectives and different ways of thinking lead to creativity and innovation.
Why Selecting a Leadership Development Program Is Way Too Complicated
Many organizations face a leadership gap and cannot find the talent needed to grow. We could blame the retiring baby boomer phenomenon, the free agent nation, or the lack of investment made in developing leaders. But since blame is a lazy man’s wage, I will not entertain that debate because there are too many options out there for developing leaders. There are many leadership development programs in the market. In minutes, with a simple Internet search or over coffee with your head of human resources, you can discover myriad high-quality leadership development programs that you could use in your organization to develop leaders. The problem is not finding a good program, but in choosing one. Answer the Right Questions So how does one choose? The problem we face in evaluating leadership development programs is that we get caught up in evaluating the content rather than asking a simple question, "What do we want our leaders to be able to do?" Each organization is unique in how it answers this question. And that is where the secret lies. If an organization can select a program that matches the answer to the question above, the selected program will likely be the right one. After all, each leadership development program is very good in some way. It is not so important which one you select. It is important that you use the one you select. In other words, the key is to not let it become another un-opened binder on the bookshelves of your management team. Be An Effective Leader Let me give you an example: If an organization’s answer to the question above is, "We want our leaders to be proactive and focused on the things that drive results," your choices are narrowed down to only a few programs that would deliver on that answer. And if I had to pick one program that would deliver on that answer, without hesitation, I would choose, "The Effective Executive" by Peter F. Drucker. It is a classic, and all five of the behaviors of effective executives taught in the book remain vital skills that any leader should practice if he or she wants to be effective in his or her organization. In the book, Drucker teaches that effective executives: Know where their time goes Focus on contribution and results Build on strengths Concentrate on first things first Make effective decisions This is not a book review or a plug for "The Effective Executive," though I do believe if you had to choose one set of skills to teach your leadership, it would be the five from Drucker’s book. This is a challenge for every organization to simplify the selection of leadership development programs, and ask, "What do we want our leaders to be able to do?" Answering this question clearly will help you choose the right program. After all, many programs are excellent. The secret to success is not in which program you choose, but that you get people to apply the program you choose. Photo: Can Stock