Recognize This! – Incentives and employee recognition are two very different programs. Be sure you’re selecting the right one for your goals and then implementing it correctly.

Once again, a theme seems to be running through my RSS reader – the problem with incentives. Incentives can have a role to play in a Total Rewards solution, but problems often arise when organizations use incentives as the sole or primary method of recognition and reward.

Why is there a problem with incentives?

Simply this – recognition and incentives are two very different things. Incentives state up front for employees, “If you do X, then you’ll get Y.” The stated goal and the end-result reward are known. Recognition, on the other hand, is always a surprise. What is worthy of recognition is clearly defined, but when you are recognized and the reward associated with it are always a surprise and ideally very timely when given. In other words, recognition is: “Now that you’ve done this, here is your recognition.”

Why is this difference between recognition and incentives important?

More often than not, incentives are poorly structured, encouraging and rewarding employees to do the wrong things.

This Wired article shares a terrific example of a grocery store chain monitoring employees on how quickly they complete tasks. Exceeding expectations earns greater rewards, but as a result (in the words of one employee), “The guys who made the scores were sweating buckets and throwing stuff around the place.” Because of poorly designed incentives, work got done faster but poorly, leading to a worse customer experience.

A Harvard Business Review blog post shared several stories of incentives gone wrong, including a bus system in an Asian city that rewarded employees based on on-time route schedules. That only incented drivers to skip stops and leave passengers waiting during peak travel times to ensure they maintained on-time schedules!

What can you do to avoid poorly structured incentives?

The HBR blog authors suggest:

Quotation

“Awareness of the problem can help organizations take the next step — effective measures to correct it. Once management teams understand the behaviors that are driven by their measurement and reward systems, they should calibrate to make sure they are incentivizing exactly the behaviors they want from their people. They should remind managers and employees alike of what should be measured and rewarded. They should also be on alert and watch for undesirable behaviors and trace back its connection with reward systems.”

“Make sure they are incentivizing exactly the behaviors they want from their people” – that’s the key. You must be sure the behaviors you are recognizing and rewarding are the ones you want to see. To be clear, you must recognize the “how” as well as the “what” – how the work got done as well as the end result.

HBR also highlights another critical element:

Quotation

“Purpose has to shine through loud and clear… On the one hand, good measurement systems are needed to track progress, and incentive systems are needed to motivate and align people. On the other hand, it is far more important to stay true to the purpose. We believe the pendulum has swung too far one way, and that balance needs to be restored.”

Recognition done right (after the fact, “Now/that” recognition, not “If/then” incentives) intentionally aligns the purpose of the organization with the desired behaviors (usually the company values) being recognized and rewarded. Most organizations have already defined what they need to see from all employees to achieve their strategic objectives. The trick with effective, strategic employee recognition is now making it a point to recognize and reward employees when you see them living those desired behaviors in their everyday work. Align purpose, behaviors and recognition and you will see measurable success.

Does your organization focus on incentives or recognition? Which do you see as more effective?