Tuesday, December 03, 2002

ORIGINAL RESEARCH: The Risks of Rewards

Reward programs have been synonymous with suggestion systems since the last 1800s. The first program, at William Denny & Brothers Shipyard in Scotland, offered small financial rewards for implementable business ideas, a useful supplement to the income of ship workers.

In recent years, important research into rewards and behavioral psychology by Archie Kohn has revealed the darker side of incentive programs. His book, "Punished by Rewards", describes vividly the problems of prescribing tangible incentives to motivate good behavior, or to dissuade people from negative behavior.

In the world of Idea Management, common pitfalls include:

Winner Takes All - one single prize is a great incentive, but everyone from second place is a loser

Money Talks - Financial rewards are quite common but you must take care to pay attention to the level of rewards. One client offered US$1000 as the top prize... for their African subsidiary. That was the equivalent of $10,000 in local currency. It is hard to motivate the same group for the second time round - a $50 Amex voucher just does not seem as attractive.

YAP (Yet Another Plaque) - They can be very effective for some people but an insult to others. Use with caution - people can tell when something is run through a laser printer.

Cost Accounting Rules - Many manufacturing firms use percentage of cost savings as the primary reward. This has a number of positive effects, many of which can be overwhelmed by the negatives. You need a lot of accountants to really measure the benefits, you need an appeal process to manage disgruntled employees, and sometimes you end up with the difficult task of explaining why a line worker has just tripled his or her salary from a seemingly obvious idea.

A good reward system can be a powerful motivator. We have done a lot of work to gauge the best way to manage rewards, particular for non-cost saving ideas. This is an area that we will investigate in more depth for sure!

If you have any ideas, feedback, or concepts you would like to share, please contact research@imaginatik.com

If you would like more information on Imaginatik's Rewards Module.

No comments: