This article highlights the key learnings from Kurt’s presentation at the “2020 World at Work Spotlight on Sales Conference”. The original slide deck is available below.
In 1937, paleontologist Gustav von Koeningswald was working on the island of Java in Southeast Asia, searching for new evidence of our early human ancestors. To achieve this goal, he needed to find fossils, and the apex of fossils was the skull. With an intact skull, paleontologists are better able to distinguish between ape and human.
But skulls were rarely are found intact.
Instead, paleontologists needed to piece together a multitude of small skull fragments in a complex 3D puzzle. It was difficult work – difficult to find all the pieces and difficult to fit them together in the right way to reform the original skull.
To help alieve the burden of searching and finding the skull pieces, von Koeningswald enlisted the help of people from the local village. He did this by giving them an incentive. He paid them 10 cents per skull fragment that they delivered to him.
And the villagers came through. Von Koeningswald was delighted as over the next few weeks they brought him many small fragments. He painstakingly put all the pieces together, and it formed an almost complete skull.
This new skull was identified as a new human ancestor: Pithecanthropus (P. robustus), which later was renamed Homo-Erectus. He had achieved his goal.
However, unbeknownst to him, the local people had looked at his incentive and found a loophole.
In their search, they had actually found relatively large skull pieces. But, because they were incentivized solely by the number of fragments they had taken the pieces of skull and broken them into many smaller fragments – thus increasing their pay but creating additional difficulty and controversy for von Koeningswald. As a result, he had a much more complex puzzle to assemble, had paid out much more than necessary, and the main expert in his field, Eugene Dubious ended up accusing him of incorrectly reconstructing the skull.
if Von Koeningswald had been able to employ a behavioral scientist to help design his incentive plan, he might have anticipated the behaviors that his piecemeal plan drove and adopted a different incentive structure.
Are your rewards programs motivating and engaging your employees?
Over the years, organizations have tried to address these issues with varying degrees of success. Often missing from these attempts is a behavioral science approach that takes into account employee psychology, biases, heuristics, and the context in which employees engage and are motivated.
In today’s fast-paced business world, motivated and engaged employees are a necessity. Yet, according to Gallup, 67% of employees are disengaged. This isn’t a small issue. Employees who are disengaged are psychologically unattached to their work and can cost employers almost 35% of their salary through lost productivity, poor motivation, chronic tardiness, toxic emotional contamination, and a host of other negative behaviors.
While behavioral science is not a silver bullet that will solve all of an organization’s engagement issues, it can help companies understand the barriers to engagement and to help chart paths to overcome them.
The Root Cause
Organizations too often overlook the underlying psychological factors that are keeping employees from being engaged. We get it — it’s hard. Most companies focus on the easy levers that they can pull, such as adding incentives or increasing the rewards that are given to employees.
However, the root cause of employees’ disengagement usually has little to do with what they are being paid. We find that the deeper issue is how an employee’s self-identity misaligns with the organization’s culture, strategy, or mission. As adults, employees end up spending more time working than eating, recreating, sleeping, or being active with families. Partly because of this, people want to feel a sense of purpose at work. When an employee is missing a sense of purpose and pride in their work, feelings of angst, dissonance, and resentment become apparent.
We also know that much of the disengagement at work is because employees often feel hindered. They lack a sense of progress. In her book, The Progress Principle, Harvard business professor Teresa Amabile recognized that a sense of progress was a critical factor in an employee’s satisfaction and level of engagement with an organization. Too often, organizational friction inhibits this perceived sense of progress. There are too many forms to fill out, too many levels of approval, too much politicking, and too many barriers to getting things done. This leads employees to deep-seated frustration.
Closely associated with a lack of progress is missing a sense of self-control. Researchers Edward Deci and Richard Ryan’s self-determination theory highlights our instinctual need for autonomy. While having autonomy doesn’t drive motivation, the lack of it can decrease engagement. This underlying driver of disengagement is often overlooked by organizations when they are considering ways to enhance motivation.
Finally, organizations don’t fully grasp how rewards and program rule structures can impact engagement. We know from research that incentive programs that rely on a “do-this, get-that” format can decrease intrinsic motivation, while program structures that highlight competence and excellence can increase intrinsic motivation. Additionally, the hedonic treadmill works against engagement when employees very quickly acclimate to changes, especially increases in compensation (including incentives). Within days of their pay raise, they begin anticipating the next level as their desired end-goal.
Overcoming the Psychological Barriers
With so many barriers, it may seem overwhelming or even fruitless. However, we believe there is hope in the form of behavioral science insights. Initiatives such as incentive communication, rule structure, award choice, and overall program management can all be positively impacted and improve employee engagement.
Here are just a few insights that you can apply to total rewards programs to increase their engagement potential.
Communication is key.
How total rewards or incentives are communicated significantly impact how employees view those incentives and how they perceive their job.
One of the barriers we’ve identified was a misalignment between an employee’s self-identity and their job. Total rewards communications too often focus on the amount that employees can earn and the rules by which they earn those dollars. While this seems reasonable and rational, the unintended impact conflates an employee’s work to a financial number. This has the effect of disconnecting that work from a larger purpose. Such communication sadly reminds employees that they are “working for a paycheck.”
Total rewards experts have a positive impact on engagement when they broadly communicate the link between compensation and the larger organizational or team goals. This provides a grander purpose for why they are getting paid and minimizes the “working for a paycheck” mentality. This means that incentive and compensation communications are at their best when they showcase how the work connects to a larger purpose, such as how their work benefits the customer, the community, or society as a whole. In the words of Simon Sinek, “Start with why.”
Get out of the way of progress.
Reducing friction in your compensation, incentives, and rewards programs can enhance an employee’s feelings of progress. We have seen many instances of organizations putting unnecessary steps or roadblocks in the way of people being rewarded for their work. The biggest culprit is found in rules that require multiple minimum requirements, or gates, that span revenue, profitability, growth targets, team results, or metrics unrelated to their jobs.
The old yarn of K.I.S.S. (keep it simple, stupid) is frequently overlooked in favor of rules that minimize liability and please leadership. Employees perform best when they have a sense of control and a perception that they can make progress by succeeding in their work. Less friction is usually achieved through clarity, simplicity, and focus on achievable initiatives.
Let your employees lead.
Lack of autonomy can be mitigated by involving people in the setting of goals that they are asked to achieve. Creating a process or method for input can help that, along with utilizing self-selected goals with incentive programs. By providing employees the opportunity to self-select goals, where rewards are commensurate with effort, employees gain a sense of control over the outcome. It also sends the message that the organization trusts them, which benefits engagement.
The structure of a total rewards programs matters. Research on motivation by Paul Lawrence and Nitin Nohria of Harvard indicates that employees are motivated by four underlying drives. They include the drives to:
A: Acquire and achieve
B: Bond and belong
C: Create and challenge
D: Defend and define
Total rewards experts typically focus on A, acquire and achieve; however, addressing the other drives can significantly augment results. Building rewards opportunities that are based on small team performance can enhance the drive to bond and belong. Making sure that incentives provide an opportunity for new exploration and challenges help satisfy the drive to create and challenge. Tying incentives or compensation into the larger picture, through communication or other means, accentuates the drive to defend and define.
Additionally, incentives that provide for non-cash rewards tap into unique aspects of motivation. Merchandise and trips reduce the “hedonic treadmill” effect and engage employees in emotional ways that cash does not. Providing options and choices helps create a sense of autonomy and control that adds to their engagement.
The structure of incentives can also help drive engagement. Management research by Alex Stajovich and Fred Luthans shows that incentives improve overall performance significantly. However, performance increases might come with a cost to intrinsic motivation — particularly if the reward is seen as controlling or decreasing autonomy. Therefore, organizations should structure incentives to enhance autonomy as much as possible.
Robert Eisenberger and Judy Cameron’s research on extrinsic motivation showed that incentive compensation structures designed to reward higher sales performance are de facto feedback mechanisms for an employee and thus, increase their feeling of self-esteem and self-determination.
And recent work by Liad Bareket-Bojmel, Guy Hochman, and Dan Ariely shows that performance after an incentive period suffered the most when the rewards were cash, and least when the rewards were non-monetary.
Employee disengagement is real, but not all-powerful. Reward professionals can counteract disengagement through behavioral-centered designs that address our human quirks. Careful planning and execution of rules, rewards, and communications can lead to significant gains in performance and engagement. By taking into consideration “why people do what they do,” organizations can improve their design, communication, training, and implementation of their total rewards programs. And by doing so, can increase engagement.