In Defense of Incentives and Recognition

This Four Part Series will be appearing in national US magazines during 2002/2003.

Part 1: Critics of safety incentive programs overlook the power of recognition

At the National Safety Congress in September 2001, two speakers presented their objections to safety incentive programs: Jim Lowe, a union safety representative; and Dr. Thomas Krause from BST, a company that trains clients in behavior-based safety observation programs and related techniques.

As I listened to these speakers make their case against incentive programs, I recalled a story told to me by a manager of a transportation company that illustrates a very different point of view:

"Some years ago we held a retirement dinner for a driver who had worked 25 years for the company. We gave him his $100 Seiko watch and his retirement certificate. He left the dinner apparently happy.

His wife called me up in tears the next day and asked if I knew how many years he had driven without an accident. I was embarrassed to admit that I did not know.

She then told me how disappointed she was that we had failed to just mention that her husband drove 25 years perfectly, without a single accident or injury. All he wanted was just our acknowledgement that he had done this. I felt terrible. What could I say?"

Lowe, Krause, and many other leaders of behavior-based programs leaders have done a wonderful job in pointing out the dangers of poorly-designed incentive programs. These programs can produce injury hiding and other negative results.

Yet it was notable to me that no one from the incentives industry was asked to offer an alternate point of view at the most recent National Safety Congress--a perspective that accounts for the story that transportation manager told me.

This article and others to follow will respond to arguments made against incentive programs and it will attempt to treat the whole subject of rewards and recognition in a more balanced way.

Kohn’s case against incentives

Lowe began by quoting Alfie Kohn, author of Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A’s, Praise, and Other Bribes. Kohn believes that recognition and incentive programs send the wrong signals to employees.

More specifically, Kohn argues that rewards:

• Punish the people who do not win them, making rewards and punishments functionally the same thing.

• Rupture relationships and undermine the collaboration between workers that produces positive results.

• Take our attention away from the reasons for poor performance in the first place.

• Discourage workers from taking risks, leading them to do only what is needed to win an award--no less and no more.

In Punished by Rewards, Kohn emphasizes the last point and summarizes his discussion as follows: "Do rewards motivate people? Absolutely. They motivate people to get rewards."

The Power of Incentives in Everyday Life

Kohn is a careful scholar and capable writer. Unfortunately, his case against rewards just doesn’t agree with our day-to-day experience.

Incentives can and do affect our behavior, and they start doing so early on. Consider the impact that grades have on school children. Since Kohn believes that rewards are ineffective, he would have us do away with grades. In their place, he calls for courses that offer compelling content and give students choices about how to learn. But how many students will study hard or complete their homework if they know that they will receive little or no recognition--the psychological equivalent of a "C" on every assignment--no matter how much effort they put forth?

Several widely-read authors on the subject of rewards and incentives ask such questions and explore their implications for the workplace. Among them is Bob Nelson. His book 1001 Ways to Reward Your Employees cites experiences from 330 companies with programs to reward employees. In the foreword to that book, Nelson sums up what he’s learned from his extensive research:

If there’s one thing that I’ve learned in my life, it’s the fact that everyone wants to be appreciated. This goes for managers as well as employees, parents as well as children, and coaches as well as players. We never outgrow this need and even if it looks like we are independent and self-sufficient, the fact is that we need others to help us feel valued.

What’s coming up

When employees decide whether they are satisfied with a job or not, recognition and incentives obviously are important. And in turn, a high level of employee satisfaction translates into tangible benefits. For instance, many managers have told me that as they improve morale, they notice that employees are less likely to abuse worker's compensation. If employees don't like their manager or feel they are treated badly, however, workers are much quicker to make an onthe- job injury claim.

In upcoming columns in this series, I’ll expand on the benefits of recognition and ways to produce those benefits through carefully-designed incentive programs.

Part 2: Programs Succeed with Adequate Funding and Sound Design

In this four-part series, Bill Sims responds to critics of safety incentive programs and makes a case for the power of rewards and recognition.

Critics of safety incentive programs often fall prey to a simple error in logic: They argue that since such programs do not always work, then they never work. If that is true, then the following statements must also be true:

• Some people who buy personal computers fail to use them properly and thus achieve no productivity gains. Therefore, all use of personal computers is ineffective.

• Some people die prematurely from cancer even after receiving chemotherapy treatment. Therefore, all chemotherapy is ineffective.

• Some behavior-based safety observation programs produce no real injury reduction. Therefore, all such programs are failures.

No doubt you can think of other examples that illustrate this "all-or-nothing" error in logic. To get past this error when thinking about safety incentive programs, we must look more closely at why some programs fail. With that understanding, we can then design programs that succeed.

Budgeting for effective incentives

At the National Safety Congress in September 2001, Jim Lowe, a union safety representative, spoke against incentive programs. To support his case, he cited research indicating that incentives have little or no effect on the results of weight loss and smoking cessation programs.

There’s an obvious question here that Lowe failed to answer: How big was the incentive?

If the incentive to meet a weight loss goal of 10 pounds is only 25 cents, then we can rightly expect a high failure rate. But if we offer an incentive of $1,000,000 to each person who loses 10 pounds, we can easily expect a rate of success that approaches 100 percent.

This point seems obvious. Yet one of the most common problems with incentive programs is that they are under-budgeted. Can any manager design an incentive program with a cost of $3 per person per year and reasonably expect a behavior change? I've seen it happen, but it is rare.

So, the "failures" that Lowe cites are not are not a reason to ban all safety incentive programs. Instead we must remember that some programs fail due to the actions of inexperienced budget planners, who may expect something for nothing.

Preventing Injury Hiding

Another reason Lowe speaks out against incentive programs is that such programs create an environment where employees fear losing incentives. In turn, this fear leads employees to hide injuries and fail to report them.

Unfortunately, this line of reasoning takes us straight into another gap in logic. Lowe’s argument rests on two statements that clearly contradict each other:

• Incentives are ineffective because they have little power to affect behavior.

• Incentives are so powerful that they cause injury hiding.

In short, incentives either work or they do not work. But they cannot both succeed and fail at the same time.

Drawing on his own experience in factory work, Lowe told a story about a fellow employee. This man used a drill bit that shattered and embedded in his chest. Instead of reporting the incident, the employee got medical treatment, came back to work, and then hid the injury. He did want not to ruin the chances of winning a "million man-hour award" for his coworkers.

Lowe’s story makes a point that I agree with: Incentives tied purely to hours worked without injuries can lead to injury hiding. To prevent this problem, you can design an incentive program based on upstream, proactive behaviors instead of trailing, downstream measurements such as time worked.

We have found it more effective to create recognition programs that are proactive and behaviorbased, focusing not only on safety results but on safety process improvements. This is precisely where good incentive program design is critical.

Summing Up

The bottom line is that safety incentive programs require work and management. Some companies fail to implement incentive programs properly and get poor results. Even worse, they can get an OSHA fine for injury hiding. On the other hand, many companies implement safety incentive programs correctly and manage them well, receiving a good return on investment.

An incentive program is like a scalpel: In the hand of a terrorist, it can bring down an airplane, but in the hands of a surgeon it can save a life. Likewise, in the hands of inexperienced planners, an incentive program can produce injury-hiding and other negative results. Yet an effectivelydesigned program can contribute to a safer workplace, year after year.

Part 3: Well-designed incentive programs appeal to intrinsic and extrinsic motivation

In this four-part series, Bill Sims responds to critics of safety incentive programs and makes a case for the power of rewards and recognition.

Critics of safety incentive programs often make a distinction they believe is crucial--the distinction between intrinsic and extrinsic motivation. To understand this distinction, we can turn to the dictionary (in this case, Merriam-Webster’s Collegiate Dictionary, tenth edition):

• intrinsic: "belonging to the essential nature or constitution of a thing. . . ."

• extrinsic: "not forming part of or belonging to a thing. . . ."

Put more simply, intrinsic motivation is internal. It’s "inside" us, part of our "essential nature." Intrinsic motivation arises naturally when we are doing something that we enjoy for its own sake. This kind of motivation does not always depend on external rewards, recognition, and incentives--that is, on extrinsic motivation.

Using Both Types of Motivation

Which type of motivation is more powerful--intrinsic or extrinsic? The debate on this question will rage on for years and probably never yield a final answer.

In the meantime, I submit that we can act on a simple and reasonable proposition: human beings are both intrinsically and extrinsically motivated. More precisely, we are intrinsically motivated at times and extrinsically motivated at other times. From moment to moment, we "live" in different places on the grid.

It follows that a well-designed recognition program appeals to both intrinsic and extrinsic motivation. We can, in effect, get the best of both worlds.

The other option is to assume that all people are motivated by exactly by the same things in the same quantities at the same time. But when we do this, our incentive programs will run into trouble.

Five Questions to Ask About Your Incentive Program

To design an effective program, ask yourself these questions:

1. Does our program get at the sources of unsafe behavior and reduce hazards?

2. Does our program offer a feedback mechanism that is immediate or at least timely--or have employees long forgotten what they did by the time we hand out our awards?

3. Does our program stimulate pride in performance and help employees feel good after being recognized?

4. Does our program cause under-reporting of injuries?

5. Can we demonstrate that our program works?

Consider an example: You set up an award to reward a department for having no injuries during a three-month period. Department A is very safety conscious, completing all the required meetings and inspections. One day, at the very end of a quarter, this department experiences a fluke injury. As a result, the department receives no award.

Meanwhile, department B is very unsafe. Employees are taught to take chances and make safety shortcuts. Even so, this department manages to avoid injuries for a full quarter (at least no injuries are reported during that period). Department B gets the safety award.

Think about the true message that this program sends to employees. Can you see the potential for damage to your safety culture? That damage results from failing to adequately answer all five of the questions listed above. Because the award program takes place on a quarterly basis, you might be able to say that it responds to question 2. In addition, the program might help some employees feel good after being recognized. However, the answers it yields for the other questions are obviously unsatisfactory.

The first question in particular reminds us of a fundamental teaching: injuries go away only if hazards are reduced. Critics of safety incentive programs often charge that such programs do not make people look for hazards and eliminate them. But this charge runs counter to our experience. During a single month at one manufacturing site, for example, an incentive program produced 200 near-miss and close call reports that were corrected before injuries resulted. Incentives can and do reduce hazards.

At the National Safety Congress in September 2001, Jim Lowe, a union safety representative shared what he learned from interviewing people at General Motors/Numi plants. Lowe talked about plants that do not use incentives tied to quality scores for fear they will receive corrupted quality data--that is, scores that are skewed by the promise of incentives. This is a viable concern, and one that calls for careful program design.

What Lowe left out is that General Motors awards millions of dollars to employees for bright ideas that help improve quality. The company’s suggestion program is one of the most productive in this country. Again, it is not the incentive program itself that presents the problem- -rather, it is the program structure.

Summing Up

The most common structures for safety incentive programs fall into just a few categories. In traditional programs, employees receive a gift for working a period of time without an injury. In non-traditional or behavior modification programs, employees are rewarded for individual, proactive contributions to safety--for example, making safety-related suggestions. (This is the type of program currently favored by OSHA.) Finally, other programs recognize employees for their contributions to safety based on peer feedback.

No matter what structure you use, I urge you to ask the five questions listed above. The power of these questions is that they get to sources of both intrinsic and extrinsic motivation. Answering them honestly and thoroughly can quickly uncover program flaws--and light a path to radical improvement.

Part 4: Incentives tap the entrepreneurial spirit and attract top sales people

In this four-part series, Bill Sims responds to critics of safety incentive programs and makes a case for the power of rewards and recognition.

A powerful argument for recognition and incentives is the example offered by Paul Shearstone, now with Shearstone Consulting. Shearstone is unique in the world of recognition experts, with a background that includes serving "in the trenches" as a salesperson and winning countless recognition awards. In fact, Shearstone was the top North American salesperson for Canon for four years running.

I asked Shearstone for this thoughts about recognition and incentive programs. His response is truly interesting.

Shearstone counsels us to remember the "80-20" rule--the idea that 80 percent of a company’s sales is generated by roughly 20 percent of its sales force. According to Paul, this rule applies well beyond the sales profession. "It is not unexpected to hear many people--perhaps eight out of ten--cast aspersions on the merits of incentive-driven motivation simply because they don't understand it," he says.

What to Remember About Salespeople

Understanding how incentives motivate sales people starts with a statement that’s no secret: top salespeople have psychological needs to win, to control, and to dominate. These are not bad qualities. In fact, the success of any business requires people with the "hunter-killer" instinct who channel that instinct in appropriate ways. Like actors, true sellers naturally gravitate to the limelight and are highly motivated by recognition.

As we know, recognition can take non-tangible forms, such as a handshake from the company president. But Shearstone urges us to remember a fundamental point about the psychology of wining salespeople: the more tactile the recognition, the more motivating it is to the true salesperson. True salespeople are complex creatures, but one quality they share is the drive to gain recognition in the eyes of others by acquiring the concrete things--such as trophies and certificates--associated with incentive programs.

Sadly, too many managers and other decision makers in business are bereft of this fundamental understanding. As a result, these managers focus their efforts in the area where they feel most comfortable: measuring bottom-line results, or "bean-counting." Unfortunately, managers often count beans at the expense of using time-tested methods to motivate salespeople. The activities and beliefs of these managers reminds me of the proverbial man who stands in front of the stove and says, "Give me heat--and then I'll chop some wood!" That's not how life works.

How Companies Lose Their Top Performers

I have seen many companies rise quickly from obscurity to great heights due to focused emphasis on the entrepreneurial spirit that walks in lockstep with lavish incentive programs. Drawing on that spirit is how companies attract top sellers and keep them.

Problems begin when a company captures its market. At that point, the company’s record of exponential growth becomes part of the past. Before long the balance of power in the company shifts from the sales side to the marketing side of the business. In turn, the reduced emphasis on sales eventually takes its toll on the corporate bottom line. Then the balance of power inevitably shifts again--this time, to the accounting department. More often than not, this development spells a company’s demise. It's a scenario with a slippery slope that usually plays out in less than five years.

This scenario unfolds when "bean counters" in back rooms--in an effort to please the shareholders--cut to the bone everything they can, especially incentive programs. Such programs are seen as unnecessary, a throwback to the past and thus no longer feasible. The bean counters do not see salespeople as the lifeblood of the company but rather as prima donnas who have had it too good for too long and need to toe the line.,p> The net result: top sellers move on, replaced by what a declining company can only attract: mediocrity. The company initiates scaled-down incentive programs, but the remaining salespeople react weakly. These people simply do not rise to the level of the top 20 percent in their profession--the proverbial race-horses who understand incentive-based motivation and account for 80 percent of corporate sales and profitability.

Summing Up

The good news is that many companies choose to end the reign of the bean counters and come full circle. In these companies, a strong, sales-minded leader usually emerges to reinstate the process that took the company to the top in the first place: incentive-based compensation programs that attract undisputed top sellers. These are the same people mentioned above--the salespeople who are driven by tactile forms of recognition in their need to win, control, and dominate.

Clearly, Shearstone was motivated to reach higher and farther by the awards he earned. And, to differing degrees, there is a bit of Shearstone in every one of us. The trick for managers is to discover that aspect of our psychology and harness it in ways that create wins for individual employees and for companies as a whole. Recognition and incentive programs are a viable tool in that endeavor.

Bill Sims Jr. is president of The Bill Sims Company, 114 Centrum Drive, Irmo, SC 29063, Voice: 800 690 1860, Fax: 803 345 0315, e-mail: bill@2billsims.com

You can contact Paul Shearstone at Shearstone Consulting, e-mail: paul@s150.com

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