Do Incentives Still Matter?
Are trips and toasters for top achievers a thing of the past? Is the gold watch for 20 years of service no longer relevant? Are “do this, get that” awards a “Pavlov’s dog” exercise that no longer truly motivate today’s business professionals?
Well, perhaps. The performance improvement industry is at risk from multiple perceptions:
- “I would rather just have cash” for my efforts
- “I’m already paying you enough to do that”
- The negative optics of trips to Las Vegas and exotic foreign destinations
- The tendency of companies to manage incentive programs as “do-it-yourself” contests
Rewards experiences, whether they are high-profile luxury trips or a set of coveted golf clubs, are still a powerful way to create positive associations with a company’s brand and with top achievements. But the reward experience is only part of the overall performance improvement equation.
A debate on the future of points-based loyalty programs happened recently at The Loyalty Academy. Across the industry, for consumers and channel partners alike, the case is being made that emotional connections and customer experiences are more powerful than a transactional, points-only approach to loyalty. There is broad agreement that points and rewards alone are no longer sufficient to win true brand loyalty.
So what’s next?
A recent article by the Incentive Research Foundation indicates that behavioral economics provides key insights for more effective incentive and loyalty programs. Because people make decisions based on emotions, tangible rewards that appeal to lifestyle preferences are more effective than cold, hard cash at forming the emotional attachments to brands and linkage to achievements. In addition, emotional connections need to be activated not just as part of the reward experience, but throughout the path to a performance outcome.
To be effective and to drive desired business results, performance improvement strategies have to be much deeper than rewards-only experiences. As the IRF article points out, “don’t underestimate the value of rewards that reinforce internal motivators.” The best performance improvement solutions tap into transformational, intrinsic motivators such as the need to be part of a social group or the need to make a difference and contribute.
In their landmark work Driven: How Human Nature Shapes our Choices (2001), Paul Lawrence and Nitin Nohria suggest the drives to bond and to create are biological motivators that are every bit as powerful as tangible rewards. Performance improvement approaches that focus exclusively on a “do this, get that” approach, without any deeper focus on intrinsic motivators, are simple transactions and do not form deeper levels of loyalty. A good example is the wireless plan discounting strategies that guarantee loyalty only until the contract is up in 24 months.
Performance improvement needs to focus not only on positive outcomes, but also on the key behaviors that contribute to these outcomes. One of the most overlooked aspects of loyalty and performance improvement strategies is the opportunity to extend gains across a larger swath of a target population by simply capturing and communicating key behaviors that characterize the top performers.
How to go beyond a “rewards only” approach to performance improvement?
- Use data to better understand the performance environment
- Add an element of design by “walking in the shoes” of your target audience to obtain qualitative insights that complement data
- Build a structure that will not only reward top performers, but also generate incremental performance
Structure is often what gets overlooked by the “DIY” segment. The result is often a “contest” that is short term and that rewards only a handful of top performers. It’s important to develop program rules that drive incremental performance and to consider a measurement strategy that validates the impact of the initiative.
When delivered in meaningful ways, with clear line of sight and with true appreciation, rewards and trips increase emotional connections and alignment to organization purpose. Focusing on the behaviors and activities that help organizations live into their purpose and meaning extends the impact beyond just the top performers.
To remain relevant, performance improvement initiatives need to look beyond a “rewards only” approach that focuses solely on outcomes. Performance improvement design strategists like Animate Growth Partners can help companies focus on key behaviors that lead to desired outcomes, thus ensuring deeper levels of engagement, alignment to a company’s mission and purpose, and profitable growth.