Reward System Surprises

CHARLES MORROW’S ARTICLE, Myths of Management, recounts the “cobra effect” or how reward systems plans do not always produce the expected consequences. During India’s colonial period, Britain sought to rid the continent of cobras. A bounty for dead cobras was instituted with the expectation that the cobras could be either eliminated or substantially reduced. Instead, the opposite happened. Residents started to raise cobras so they could have a steady stream of reward income.

The same disconnect recently surfaced when Swedish train operator, Arriva, barred male employees from wearing shorts on the job. The assumption was that male staff would continue to the wear uniform trousers. No other option was considered plausible. Compliance with the new policy seemed assured. When men elected to wear skirts for greater “comfort,” the policy changed. Uniform shorts were distributed.

These missteps stem from a limited understanding of how others interpret an incentive or how it might be counterproductive. Consider the consequences of paying a writer by the number of words submitted. Encouraging length has clear downsides, especially in an age when brevity, not heft is valued.

Failing to consider a wide range of consequences is not the only prevalent reward system problem. Relying on old formulas

Steven Kerr’s 1995 article “On the Folly of Rewarding A, While Hoping for B” highlights the issue of ignoring messages encoded within incentive systems. Consider what frequently happens during a new product launch. Sales professionals are asked to sell a new product despite the fact that selling older products provided greater income. New product promotion and sales suffer as a result.

Current CEO studies stress the desire to increase innovation and engagement. Yet, incentives continue to be bestowed on lone rangers and those who stick with the tried and true. When predictability rather than innovation generates rewards, creative thinking dissipates and collaboration devolves into lip service, instead of action.

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Collaboration requires allocating effort to other colleagues or teams which comes at the sacrifice of meeting personal metrics. Even organizations that meld individual and team performance standards do not truly reward collaboration. Productivity measures take center stage, rather than interactions. Up to now, few organizations actually measure and reward collaboration.

To check whether your reward practices mirror your strategy consider the following:

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  1. Are you monitoring both short and long term impact? Reward systems must target strategic and sustainable performance, rather than merely immediate results?
  2. Who got the last promotion or plum assignment? Was collaboration or self-promotion evident? Career success paths are scrutinized, adopted and perpetuated. Actions eclipse exhortations or value statements. What gets rewarded gets repeated.
  3. What happens to an individual who initiates a change that fails to live up to expectations? If a mistake equates to a career limiting action, few will continue to take the initiative or seize opportunities. When the safe and secure route offers advancement, reasonable risk-taking dissolves.
  4. Are rewards granted solely through the chain of command? Teamwork and collaboration occur laterally beneath the managerial radar. Input from peers is essential and overlooked.
  5. Are coaching and mentoring rewarded? When developmental efforts count, they become a priority. When they are not monitored, coaching equates to a nice to do activity, instead of an essential function.
  6. Are you sure your rewards are those that are valued? Not all carrots or rewards are equally attractive and those preferences change over time. Twenty years ago the opportunity to work overtime was valued. Conditions change and what people value changes with time as well as personal interests. As time passed, overtime was written into contracts as a job requirement. Few welcome it, even with overtime pay.[/message][su_spacer]

The illusion that incentives and rewards are easily managed, precise or fixed comes from a simplistic point of view. If we want effective reward systems, we should consider the context and all of the potential ramifications. Otherwise, just like the cobra, it will come back to bite you.


Dr. Mary Lippitt
Dr. Mary Lippitt
Dr. Mary Lippitt is an award-winning author of "Brilliant or Blunder: 6 Ways Leaders Navigate Uncertainty, Opportunity, and Complexity.” She founded Enterprise Management Ltd. in 1984 to provide leaders with practical and effective solutions to navigate the modern business climate using situational mastery. Dr. Lippitt is a thought leader and speaker on executing change, optimal leadership, and situational analysis. She currently teaches in the MBA program at the University of South Florida. Mary is also the author of Situational Mindsets: Targeting What Matters When It Matters.

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