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When Is An Incentive Effective?

Wednesday, August 1, 2012
The Society for the Advancement of Consulting® has asked its global members to comment on incentives and their use. Alan Weiss, PhD, SAC CEO, says, "This issue need to be constantly revisited as society, economies, demographics, and technologies evolve. Here are some representative opionions."

Dr. Maynard Brusman is a San Francisco Bay Area executive coach and consulting psychologist specializing in emotionally intelligent leadership development. He is the president of Working Resources, a talent management consulting firm. He offers a few insights:

Dr. Brusman notes, "Historically, monetary incentives have been used to reward employees for desired job performance. Rewards have typically included profit sharing, stock options, additional paid vacation and performance bonuses. However, monetary rewards do not always achieve the desired effect in a business, and may actually create new problems. Non-monetary incentives are frequently proving themselves as more effective for providing recognition and rewards in today's workplace."

According to Dr. Brusman, "In today's business environment, motivating people to be their best is more crucial than ever. Companies need to provide more than a paycheck to motivate people to perform optimally. Meaningful work is more important than money for most people. They want to feel they're part of something larger than themselves—needed and challenged. They enjoy learning new skills, growing in their jobs and ascending to higher levels. They want to be a part of an organization that is dedicated to worthy achievements.

"Make sure people have a sense of purpose in their work—preferably to something higher and beyond their job, salary and company. Google is famous for its '20-percent time' program, which allows engineers to spend 20 percent of their time on projects that interest them. Google Mail is one successful project that came out of the program. The Australian tech company Atlassian implemented a similar program, with engineers given a full day each quarter to work on any software problem they choose—a ritual the company calls 'FedEx days.' (Completed projects are delivered overnight.)"

More often than not, increasing non-salary benefits as incentives is a very bad idea. According to Dr. Pat Lynch, President of Business Alignment Strategies, Inc. ( in Long Beach, CA, "Incentives tend to be very ineffective at changing employees' behaviors in the intended direction because they often are used incorrectly and their implications are not well thought out. As a result, they become a very expensive ‘quick fix' that may even create additional headaches."

Dr. Lynch offers three reasons why organizations are well advised NOT to increase non-salary benefits as incentives:

  1. Their costs outweigh their benefits. When employee benefits, which typically are long-term, are used to effect short-term changes, their costs continue long after they have achieved their intended results.

  2. Their motivational potential is limited. After the initial novelty wears off, benefits are viewed by employees as entitlements. As a result, they lose any effectiveness they might have had as motivators.

  3. Employers become stuck with them. Despite cutbacks in benefits in recent years, the expectation in U.S. workplaces is that benefits are relatively permanent. Once given, they are not ceded without a fight, or at least a significant drop in employee morale.

Instead of increasing benefits as an incentive to change behaviors or results, Dr. Lynch recommends that organizations implement recognition programs. With literally hundreds of low- or no-cost ways to recognize desired behaviors and outcomes that also are likely to enhance employee commitment, it makes no sense to gamble that increasing employee benefits will somehow effectively resolve the issues at hand.

"Carrots don't work," says Ann Latham, a leading expert in creating clarity and the president of Uncommon Clarity. "Employees excel when they are motivated by their work and supported by the environment. Thus, offer fair and competitive compensation of the types your employees value, and then concentrate on matching employees to responsibilities in such a way that both individuals and the organization thrive."

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