Posted by Boris Pluskowski on November 04, 2002 at 13:03:44:

In Reply to: Re: Dangers of Rewarding Employees posted by Reilly Atkinson on November 01, 2002 at 18:08:16:

Reilly - first let me start by saying that, to an extent at least, I agree with you. Motivational techniques as a whole should not be decided upon in isolation from the participants. And sure - workers deserve bonuses as much as executives - but that isn't the issue in question.

However, frequently these end up being demotivators in the long-run (cash tends to be only a short-term motivator), fuelled by competitive spirits and dissatisfaction with whatever monetary reward you give them.

For example: Let's assume you give an employee "a sizeable piece of the action" as you suggest. For starters - how much of the action do they deserve? If they come up with the idea for a new product, how much is that idea worth? What time period do you consider? Do you then also have to recompense everyone who then works on that idea to make it a reality? Product developers who make the idea a reality; Marketing people who create the packaging and sales strategy; Salesmen who get it into the stores; Store Owners who promote it properly..... Who really deserves the credit?? - even a bad idea can be made into a success with good marketing nowadays....

And there are many other issues too - what does a company pay an employee's salary for if not to purchase both their intellectual and physical capacity. Indeed most employee contracts I've seen mention this explicitly.

Ultimately Reilly, you also have to consider what you're trying to achieve here. The vast majority of good ideas aren't contributed from a single person, but rather as a collaborative effort. By establishing significant cash rewards for individual's ideas, you establish a non-sharing, super competitive, and anti-cooperative culture where people don't share with each other because they want to get the money themselves. Disagreements over whose idea it was, where the value in the idea comes from, etc will just add to what will ultimately be a company that loses its ability to be innovative.

I haven't even gotten into the subject of "gaming" of a system that gives cash rewards for ideas! Particpants in these systems will tend to play to whatever rules you set in order to maximise the payout. One company had the experience of a marketing manager who would secretely pass the markteing ideas he had to a line worker who was elligble for the program so as to collect on the cash too. Another company had a pair of employees who provided a partial performance improvement to a process one year, so they could repeat and deliver a second the following year - despite having the full solution the year before.

And there are tons more reasons why cash is not the best option to reward people for knowledge / ideas - especially as there are other options that will frequently work better - although you obviously have to take into account who your participants are.

Read Alfie Kohn's "Punished by Rewards" it's not the easiest of reads, but is filled with plenty of examples about this kind of phenomenon and other issues associated with it.

For example, in addition to personal disadvantages - there are also many disadvantages on the corporate side. The cash incentives required to be paid out make the idea less attractive for companies to implement as it takes away from the potential gains - there is less motivation to actually implement the idea - more risk and less benefit. Certainly, it will mean that companies will probably only implement really big Ideas, ignoring the many small improvements that might eventually have the same pay-off. In fact, Caterpillar in France (and several other companies as well) I believe had a similar issue - they eventually closed their program because after evaluations, they were unable to effect any cost savings because the reward structure and the overhead of the system ate all the gains.

OK - I'll stop now - this is prob. getting too long!

Best Regards,

Boris

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• reward and promotion Matthew Nti 14:28:00 03/07/03 (0)

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