Rewarding Incorrectly

The objective behind a reward is to provide employees with an incentive to achieve a set of goals desirable for the business.

The Organizational Behavior literature provides some guidance as to how to increase a reward’s effectiveness. For example, a reward can be extrinsic (a tangible reward like a bonus) or intrinsic (a compliment for a job well done). Tangible rewards work to a point but then its value diminishes. The type of work also influences the success of a reward. Assembly-line workers (those who do routine work), for example, are more motivated by cash rewards than are knowledge workers.⁴ The idea behind rewards is closely related to the concept of reinforcement. Reinforcements are used to drive the repetition of desirable behaviors – giving a bonus or “diploma” for completing a class so that more classes are taken – and to punish – assessing a penalty for submitting taxes late so it does not happen again – to stop unacceptable behaviors.¹

This week's post is about the problems that occur when a reward or reinforcement is used without giving due consideration to the kind of behavior it can cause. The idea for this post came from an article written by Steven Kerr entitled, "On the Folly of Rewarding A, While Hoping for B."^{2 & 3} In these articles, Kerr demonstrated, with examples, the harm of using rewards improperly and how unintended behaviors can result.

Over many years I have witnessed the outcomes associated with reward and reinforcement systems. Sales compensation packages often provide good examples.  Years ago I was in a commission sales position and I had a sales quota. In this type of role, one always feels on the edge of losing his or her position. The leader wants employees to weigh the issues and make the proper behavioral choices. That is, the leader’s responsibility is to create a compensation package that encourages sales through only honest and ethical behavior.

The challenge begins with the way compensation is awarded. For example, each product I sold carried a certain compensation and quota credits. One product was particularly attractive both in the amount of commissions it paid and also the benefits toward meeting quotas. For obvious reasons, I focused on this product since it offered the most aggressive paybacks. Strangely enough, this product was known by the company to be less profitable than others, and we were explicitly discouraged from its sale. This led to a predicament; doing something beneficial for me as the salesperson or protecting the company’s bottom line. The company was rewarding one behavior but hoping for another.

 This is also a classic short-term and long-term problem. Does the leader focus on the short-term quarterly gains for which he or she is rewarded, or focus on what he knows to be the right thing to do for the long-term health and welfare of the business?

Another example comes from working as part of  a team. Over the years I have worked on hundreds of project teams. In nearly every situation, my yearly evaluations have exclusively assessed my personal achievements. This defeats the purpose of using teams. Team success is based on the coordinated and collaborative efforts of its members toward a specific outcome. When an individual is on a team, he or she gives up some individual independence and autonomy. It is the interdependence of a team that makes team outcomes excel beyond what an individual can accomplish alone. That is, under the right conditions (e.g. comfortable climate – see previous blog post), better ideas and creativity – along with the application of different skills and backgrounds focused on business problems – leads to greater success⁵. If the organization solely rewards individual accomplishment, then the individual is thrust into the dilemma of choosing between what is good for the team versus self. Acting only as an individual within a team can lead to diminished cohesion and, ultimately, poor outcomes. If organizations want the benefit of a team, leaders must be prepared to reward and evaluate at the group level. Certainly individual level appraisals are still needed.

The next example regards using do your best goals versus assigning a specific objective. Since do your best is subjective, it can be interpreted as any action is acceptable. However, this is not the intent. Leaders always want citizenship behaviors (see previous blog post). Leaders have the option of using goal-setting models like that created by Edwin Locke.⁶ His model has a lot of valuable dos and don’ts, but the leader can use a short cut by assigning goals in a SMART format. The acronym stands for measurable, attainable, relevant, and time bound⁷. Imagine a project that is assigned by a leader with no clear outcomes targeted and no specific timeframe for completion. This can lead to an undisciplined project and little motivation to aggressively pursue an outcome. Sometimes leaders think giving less information is empowering, but it often backfires. The folly can then be interpreted as giving too much freedom but expecting the team to deliver a project smartly.

Finally, the performance evaluation process can also generate unwanted consequences. The annual ritual starts with both the worker and leader completing an appraisal of the worker’s performance for the previous year. If a manager does not take this process seriously (most hate this process), he or she could take any number of short cuts to complete the documents. In an extreme example, the leader builds his appraisal using the employee’s self-evaluation. What is the outcome? When the employee learns of this, he or she vows to embellish his self-evaluation going forward and suddenly is the perfect worker. The whole process becomes damaged as a result, and the needed dialogue between the leader and worker does not happen.  Thus, the act of not taking something seriously could end up rewarding bad behaviors.

There are always going to be problems found in organizational reward and reinforcement systems. The leader’s job is to understand this and be diligent about the potential consequences from decisions about rewards and reinforcements.

Please feel free to make comments.

References

¹ Andre, R. (2008). Organizational Behavior. Upper Saddle River, NJ: Pearson Prentice Hall

² Kerr, S. (1975). “On the Folly of Rewarding A, While Hoping for B,” Academy of Management Journal, 18(4), 769 - 783

Original article located at: http://www.csus.edu/indiv/s/sablynskic/documents/rewardinga.pdf

³ Kerr, S. (1995). “On the Folly of Rewarding A, While Hoping for B.” Academy of Management Executive, 9(1), 7 -16. Article found at: http://www.ou.edu/russell/UGcomp/Kerr.pdf

⁴ Pink, D. Drive: the Surprising Truth About What Motivates Us. New York: Riverhead Books.

See video for more information at: http://www.youtube.com/watch?v=u6XAPnuFjJc

⁵ Levi, D., (2011). Group Dynamics for Teams. Los Angeles: Sage.

⁶ Robbins, S.P., Judge, T.A., (2011). Organizational Behavior, 14^th edition. Boston: Prentice Hall

⁷ According to Wikipedia, “The first known uses of the term occur in the November 1981 issue of Management Review by George T. Doran.”