Benefits and Compensation, Learning & Development

Finding the Right Incentives to Stimulate Action

Whether or not someone takes a particular course of action often boils down to a competition between different incentives. When a criminal considers robbing a bank, he or she must weigh the negative incentive of going to prison or getting shot in the attempt against the positive incentive of potentially coming away with a lot of money. When an employee is struggling to get out of bed in the morning, he or she must weigh the positive incentive of getting a few more minutes of rest against the negative incentive of getting in trouble with his or her boss.

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Incentives are often subtle and even hidden, but they drive so much of human behavior that they are a crucial tool for managers to influence the behavior of their workers.

Incentives Matter

For example, it might seem like employees who are paid a fixed annual salary have little incentive to go the extra mile at work—after all, they’re paid the same whether or not they excel. However, employees often see their positions as more dynamic than static.

Poor performance can lead to termination, while exceptional performance can lead to promotion and the increase in prestige and compensation that go along with it. These are both examples of incentives. More overtly, many employees are incented to go the extra mile through bonuses and other forms of special compensation.

Some Incentives May Be Too Weak

In discussing the role of incentives in his own personal life in an article for Forge, Barry Davret argues that the problem with many intended uses of incentives is that the incentives are too weak to promote the strong change in behavior desired.

While the right incentives can lead us to do almost anything—even things we might believe are well beyond our capabilities—Davret writes that there is a difference between weak and strong incentives. “When they’re weak, they don’t move us to take action because we’re too comfortable with the status quo even when it keeps us unfulfilled and unhappy,” he says. “Inertia becomes our enemy, and the only way to overcome it is to design incentives that make the status quo uncomfortable.”

Considering Incentives Carefully

Bonus structures that are too predictable or insignificant, for example, are unlikely to foster meaningful change. This doesn’t mean the solution with incentivizing desired behaviors is always to simply throw more money at the issue, but when desired behaviors don’t materialize, looking at the existing incentive structure may be a good place to start looking for improvements.

Incenting performance is complex and requires careful consideration to ensure that rewards are aligned with desired outcomes—and drive those outcomes.

Lin Grensing-Pophal is a Contributing Editor at HR Daily Advisor.