Take me to the pilot… Good Incentive Design

Incentive programs are sometimes more art than science.

I think that is due to a variety of studies that contradict each other and gurus who do the same. That tension creates “gray” areas and they get filled with the “art” part of the design. The contradiction starts with the “incentives destroy intrinsic motivation” camp – which can happen if you focus on rewarding already intrinsically motivated behaviors (why would you do that anyway?). Think Alfie Kohn. And then there is there is the camp that says – incentives work and they DO drive behaviors (lots of data at the Incentive Research Foundation that prove incentive have a big impact on results.)

I stand firmly on the shores of the latter camp and believe PROPERLY designed incentives are an important tool in management’s toolbox and should be used when needed. But, as I’ve said over and over and over again, like any tool – it is only as good as the craftsman. Too often incentives, in general, get a bad rap because the programs were designed by idiots. By the way – did you see my post yesterday at Fistful of Talent: Employee Engagement Plan – Dumb or Dumber? You Make the Call?

More often than not… any discussion on how and why an incentive failed will ultimately come back to a program design flaw.

And for the record – designing incentives isn’t easy. There are a lot of moving parts and a lot of psychology that go into the proper design of a program.

Case in point.

Pilot post

A recent article on the University of Chicago site outlined a study that tested different interventions to see what type of approach would have the biggest impact on fuel savings and reduction in carbon emissions. Even though only one of the approaches included an actual “incentive”, there are great learnings for program design in the other options.

For those that like to read – here’s the link to the study on their site – for the rest of you, a summary follows:

Goal: Help pilots decrease fuel costs and be more carbon-efficient in their flight practices.

Study:

  • 40,000 flights
  • Randomized captains to one of four groups
    • “Business as usual” control group and three intervention groups receiving monthly letters: 1.) Personalized feedback on the previous month’s fuel efficiency practices, 2.) Targets and feedback on fuel efficiency in the upcoming month 3.) A £10 donation to a charity of the captain’s choosing for each of three behavior targets met.
  • Results
    • All four groups increased their implementation of fuel-efficient behaviors, demonstrating that informing captains of their involvement in a study significantly changed their behavior. (It’s a well-documented social science finding called the Hawthorne effect.)
    • Tailored information with targets and feedback was the most cost-effective intervention, improving fueling precision, in-flight efficiency measures and efficient taxiing practices by 9 percent to 20 percent.
    • Charitable contributions for meeting targets did not further change behavior, but captains in this group reported 6.5 percent higher job satisfaction than captains in the other groups.

My thoughts on this program.

  1. Incentives applied to behaviors that have an “intrinsic” element are not always effective. There is some cognitive dissonance associated with getting “paid” to do the right thing. This is not the case when the behavior you want doesn’t have any moral or ethical overtones. In other words… Incentives for selling stuff work. Incentives to give to the poor. Not as much.
  2. Never, ever overlook the impact of paying attention. Just knowing people are watching your work impacts your motivation to do it (and do it well.) I’ve talked at length in other posts about the effect of simply showing people you’re paying attention to them.
  3. Progress is one of the more powerful ways to drive behavior. People like challenges. People like to see how they are doing against their challenges and goals. This study again proved that out by showing pilots what they’ve done and suggesting ways to improve. How often do you do that with your own employees?
  4. Connecting job outcomes to positive actions (ie: charity) impact employees even if their performance doesn’t change. Something to learn for you employee engagement gurus. Good employee connections don’t always result in performance improvements.

And the big takeaway from this study:

The interventions appear to induce habit formation, as fuel efficiency measures remained in use after the study ended.

That’s right. After the study, the pilots continued to practice and use the skills they learned during the study. And isn’t that what we all want? We want to create an intervention – run it for a specific time frame – see the results – and then move on. This study shows that you can do that. You don’t have to continue to run incentives to get people to focus on what needs to be done.

This is almost textbook except for the reward overlay, which would be more important for the vast majority of behaviors you’d want to influence in a channel program or a sales incentive. Reread my Point #1 above. Rewards work in most business situations. WHEN DESIGNED APPROPRIATELY!

Here’s to good program design.


 

2 thoughts on “Take me to the pilot… Good Incentive Design

  1. Pingback: Design Flaws: Painfully Frustrating - Quality Incentive Company

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