Incentive Plan Design Rule #1: Stop, Think and Start Asking Good Questions

I recently met with the management of a local company to discuss their interest in designing and implementing an incentive plan for a particular group of jobs and employees where a significant shift in attitude and behavior was deemed necessary.

And in the next breath, they described for me some of the key characteristics of this particular set of people - including the fact that they tended not to be motivated by money.

I share this brief scenario because it sets the stage for what I believe is the first rule of incentive plan design, one that I will call "Stop, Think and Start Asking Good Questions."  Many of you who read this blog - I'd be willing to bet - have been approached on more than one occasion with an urgent request for immediate implementation of an incentive plan to address some performance issue.  My best advice to you:  Put the breaks on and take a moment (or perhaps a few weeks) to figure out exactly what is going on.

Incentive plans, while a powerful tool for the positive, also have to potential to inflict damage when carelessly or short-sightedly thrown at ill-defined problems.  So, your first task when asked to design an incentive plan is to start asking questions.  Here are a few of my favorites to get you started:

What, specifically, do you want to achieve by putting in an incentive plan?

What specific improvements - behaviors and outcomes - would this plan be designed to drive?

What is preventing these improvements from happening now?

What kinds of challenges and obstacles might people face in trying to make these improvements - in trying to exhibit these behaviors and/or produce these outcomes? 

How will people respond to these challenges and obstacles - what will they likely do?

You get the idea.

My advice:  Don't proceed with any incentive plan design until you get the answers to these and other good questions you come up with.  Only then will you have a true sense of the context into which this proposed incentive plan will be dropped, and whether it is likely to solve or exacerbate the performance issue.

Performance, as Deming told us, is a systems thing.  It is complex and multi-faceted.  Rewards, including incentive plans, cannot drive the performance improvement bus alone.  They succeed best as a part of an overall performance improvement effort.  Unless you identify and remove the barriers to performance, and create the setting in which performance improvement is possible and even likely, throwing incentive money at the problem will likely have little positive impact and may produce some very real negative consequences.

Stop.  Think.  Start asking some good questions.

Comments

[almostgotit]

The main reason I turned down a job offer a couple of months ago had to do with this very problem.

The entire team was performing badly, and management (which had already run another company into the ground) had tried to solve the problem by reducing base pay across the board and making a substantial portion of compensation commission-based -- and **surprise!** there was no change in team performance. In fact, people were clearly demoralized: some members weren't even in sales and thus had no way to control their own commissions, while the sales people were minimally qualified anyway, and only stayed under the newly-punitive conditions because they weren't good enough to bail out for anything better.

I was asked to buy into this model as a team leader, but was rebuffed when I suggested that we look into some different ways of motivating the team as "more of the same" clearly was not going to work. It already was not working. Rocket science, anyone? It took me a while to realize anyone could *really* be that stupid, but I did finally pick up my skirts. To RUN.

(Two weeks later? The General manager quit and I understand the company is in serious trouble. Boy am I glad I dodged that bullet!)

[Ann Bares]

Almost:

Thanks for the comment and the story! Incentives designed to support and reinforce sound management practices can add real value; incentives applied in lieu of sound management practices hardly ever produce positive results. Sounds like your decision to run was a smart one!