Increased employee productivity is a goal of many businesses and non-profits. Should we use an incentive system based on rewards to increase productivity, or will that backfire?
This isn’t the first time we’ve discussed incentives and productivity on The Methodology Blog. In short, they really don’t work. If you offer to give people more money if they work harder, in the long run these people become more interested in the reward than they are in the work. They often find ways that undermine the desired result, which ensures the incentive actually makes the situation worse.
But what if instead of giving individuals rewards, we offer them to the entire team? An op-ed piece from The Independent—which services the growing economy of Zimbabwe— supports team-based productivity incentives for a hypothetical entrepreneur:
Apart from training and systems improvement, [business owner] Panashe can institute a restaurant-based productivity improvement incentive.
Let’s illustrate the mechanics of a scheme she can institute in one of her restaurants. We will call this restaurant Branch B.
Branch B is returning gross profit margins six percentage points below the accepted level as benchmarked against the flagship restaurant. In other words, Branch B is ‘throwing away’ six cents for every dollar of sales made.
Panashe can decide to convince her employees that if Branch B manages to save these six cents per dollar of revenue for the company, the employees can share the six cents per dollar of revenue savings with the company.
Panashe can say to the employee ‘let’s go 35-65’; you share two cents among yourselves and you give me four cents.
On the one hand, this seems reasonable. After all, increased revenue is good for everyone, right? Better performance means a monthly bonus available for all the employees at the branch location.
But on the other hand, how is a group of people different than an individual? Will this scheme backfire the way that straight commission plans often encourage individual salespeople to overcharge?
How do we increase employee productivity? There are no easy answers. But simple approaches based on incentive plans are at the very least, dangerous. Instead of trying to bribe people into working harder, we need to figure out what truly motivates them and work at engaging them where they actually are.
Let us know if you agree or disagree in the comments below.