A recent post on PsyBlog outlines the distinct difference in performance between people who “fantasize” about future success and those who “expect” future success. The blog article was based on research by Oettingen and Mayer (2002) in which they concluded, “Positive expectations (judging a desired future as likely) predicted high effort and successful performance, but the reverse was true for positive fantasies (experiencing one’s thoughts and mental images about a desired future positively).”
The PsyBlog article explains the difference between expectations and fantasies as follows: “Expectations are based on past experiences. You expect to do well in an exam because you’ve done well in previous exams, you expect to meet another partner because you managed to meet your last partner, and so on” while “fantasies, though, involve imagining something you hope will happen in the future, but experiencing it right now.” The difference might seem small, but in fact, had a big difference in outcome. People who had high expectations about finding a job did much better in actually finding a job than those who just fantasized about finding a job. See more results here.
Which leads us to our potential problem with incentive programs.
Do we end up communicating to everyone that they can achieve the highest payout or reward? If we do, then does that lead to fantasizing about the reward instead of expecting the reward? I’m not sure.
On one hand, I know that in the communication work that we do, we typically use examples and highlight top earners – the ones who achieve in the top 10% of participants. How does that communication play with the 50% of participants who are in the bottom half of earnings and probably will not achieve that level of success? We show pictures of what people can buy with their earnings – a new boat, travel to a tropical island, new coach bags, a 62 inch t.v. Are we inadvertently leading these people to fantasize about what they can do with that extra $20,000 when they don’t have the history to expect that they’ll ever earn it?
Companies often use annual reward trips, short-term contests or non-cash incentives that reward the top 5% or 10% of performers – do these by their nature create a split between those who expect to earn them and those that just fantasize about earning them? Does this then lead to poorer performance by those who just fantasize about winning them with no real expectation of actually winning?
This is just one study, but it resonates with other information on this subject from Locke and Lathum; Badovick, Hadaway, & Kaminski; and Bandura to name a few. So what does it all mean?
Are there solutions for this besides just chucking the entire incentive system out the door?
Of course. When we take a holistic approach and think about this differently.
A few ideas that would help include:
- When communicating incentive plans, make sure that you provide examples of what average performers can earn as well as top performers.
- Highlight realistic increases in performance when using now and then comparisons – don’t make the growth so great that it seems unrealistic.
- Communicate specific actions that people can do to achieve the desired performance level.
- Make sure that you have opportunities for people to earn something at various levels of overall performance. Don’t just reward the top 10%. Hang a carrot out there for people in the bottom 50%.
- Utilize tiers when creating contests or incentives if there are large differences in average territory size / market share / potential.
- Include different measures – not just top line sales (e.g., % growth, new account growth, market share, etc).
- Offer opportunity for sales people to self-select their goals (within specific guidelines) and provide different rewards for them based on the goal they pick. For instance, you could say, if you pick a 3% growth goal you earn $X, if you pick a 5% growth goal you earn $XX, and if you pick a 8% growth goal you earn $XXXX.
While we all like to dream, we might need to ensure that our incentive programs offer a little more grounding.
So what do you think – is this all just ivory tower research that has no application in the real world, or is it something that we need to take into consideration? Let us know your thoughts and leave a comment.