The Words "Discretionary" & "Incentives" Should Not Be Used in the Same Sentence

Discretionary awards are not incentives, not in the true sense of the word.  Not in my opinion, anyway.  Seeing the words "discretionary" and "incentives" used together, for me, produces an effect similar to fingernails being dragged across a chalkboard.

A discretionary award, typically, is one where the decision whether to grant an award and for how much is left to the judgment of an individual or group.  There are no formal rules, criteria or targets - although sometimes there is a general sense of what the judgment is based upon.

Here is the essence of the issue, for me:  A discretionary plan really doesn't communicate to participants what steps or actions are necessary to earn an award.  So you aren't really directing - or incenting - them to do anything in particular.  (Except maybe hope.)

A recent conversation I had with a manager - someone employed by a company with a history of annual discretionary bonuses - sticks in my mind.  When I asked him his opinion of the bonus plan, and the impact he thought it had on his work, he told me, "It's great when the bonus comes through; I really appreciate the additional money.  But I have no idea what I'm supposed to do to earn it.  I don't think any of us do."  To me, this sums up the entire issue.

I understand and appreciate that leaving a bonus decision up to somebody's last minute judgment seems like a safe thing to do.  It feels way less risky than making that upfront commitment (i.e. if you do X, we'll pay you Y).  The question is: What are you getting for those bonus dollars, other than the warm feeling that you've covered all your bases before handing them out?  You haven't driven any particular results or behaviors, have you?

So, go ahead with that discretionary plan, if you must.  Just don't kid yourself into thinking that you are incenting anyone.

 

Comments

[jim brennan]

No unexpected bonus can be termed an incentive, unless one believes in random reinforcement. You can't influence behavior effectively with secret reward programs.

Back in The Day, Maritz had an excellent ABC formula for their prize-based non-cash incentive plans: Antecedent, Behavior and Consequence. If there is no antecedent (announced description of desired results), the consequence is seen as a suprise gift rather than an earned reward whose receipt reinforces the desired dynamic to similarly adapt behavior to meet the next antecedent objective for more positive consequences. The experimental basis of the logic stretches back to Pavlov and continues today.

Despite what you merely say, behaviors that are reinforced with positive consequences tend to be repeated.

[Dan McCarthy]

Ann –

Hmm…, a 5:00am post first day of vacation?

Hope you kick back, relax, and have a great vacation. We’ll all still be here when you return.