Two of the world’s most recognized brands got incentives wrong. Find out what they did (and could have done) to get them right.
The American Airlines story
Lesson learned: Employees must have control over the results they are incented to achieve and rewarded for.
American Airlines learned this lesson when they decided to create an incentive program designed to reward employees for improving customer service and on-time performance. The problem was that on-time performance depends heavily on the weather and air traffic – two factors employees cannot control. As a result, the program backfired and employees became frustrated so American Airlines went back to the drawing board.
What did American Airlines do to improve their incentive program?
They created
specific metrics around the behaviors they wanted to drive.
Mark Mitchell, who managed American Airlines’ operations in Los Angeles and in New York City, created a better incentive program designed to improve customer service by establishing specific metrics to the desired behaviors. For example, customer serving employees were required to greet first-class passengers by name. The reward they received depended on the marks the team received in customer satisfaction surveys.
By establishing specific metrics, the program became more scientific and less subjective. This approach made employees feel empowered because they had concrete goals that were achievable and under their control.
The Hewlett-Packard story
Lesson learned: Using cash-based incentives can create self-interested employees who focus more on chasing money than doing things that benefit the organization.
In the 1990’s
Hewlett-Packard adopted a cash-incentive model, hoping to boost productivity and encourage a focus on team rather than individual performance. They designed a plan that tied 10 to 20 per cent of their workers’ pay to their team’s performance. When management found out that they were paying out more than expected because the majority of teams were exceeding their goals and cashing in, they set higher targets. This resulted in low morale, competition and less knowledge being shared amongst employees. High-performing teams refused to allow workers they saw as less experienced join them.
What could Hewlett-Packard have done?
The management team lacked an essential ingredient in their incentive program – recognition. Recognition for achieving or exceeding a goal puts meaning behind the achievement, and makes an employee feel that they are contributing to the organization. According to an on-going
poll by BNET, the two top things that motivate people at work the most are “Doing something meaningful” and “Recognition”. “Big, fat bonuses” ranks pretty low in comparison (side note: you can cast your vote on what motivates you
here).
The American Airlines and Hewlett-Packard stories are taken from BNET’s postings “
Don’t Let a Bonus Plan’s Goals Exceed the Employees’ Grasp” and “
How NOT to DO Incentive Pay” by Kevin Gray.
For tips on how to best recognize your employees read our
top seven recognition best practices.
For more on why cash is not a motivator, read Razor Suleman’s column in Canadian HR Reporter “
If Cash is King Rewards are Queen”.
