Are we incentivizing our employees in the right way?

A lot of research at prestigious institutes has proved that the usual corporate incentives — bonuses and commissions, block creativity. This is counter-intuitive to how the performance appraisal programs are developed across all types of companies throughout the globe.

The current reward system is suited for the 20th century, it hasn’t undergone any transformation with the kind of work we do now as compared to that we did in the last century.

Why did the incentive performance program work well earlier?

The incentive framework is well suited for tasks wherein the end-goal is well defined, the solution of the problem at hand is well structured & narrow. In short, there is minimal or no creativity or cognitive thinking is needed. The carrot & stick mainframe works best for such mechanical jobs! These jobs were in abundance during the industrial revolution which encouraged employers to incentivize their high output generating employees through money or punishment

So what has changed now?

With the advancement of technology more & more mechanical & repetitive jobs have become redundant or automated. Also due to globalization, in the last decade, such jobs have been moved to countries that can provide cheap labour. In a nutshell, people in the developed countries or knowledge workers are being pushed to work on jobs that require solutions, problem-solving or to summarize ‘think out of the box’ to solve the problem. There has been a significant shift in the nature of jobs now.

So what could be the new approach?

The 20th motivators were basically external motivators either to get paid more or to get punished for not doing something correctly or in time. Whether the employee was engaged or not, did not matter. There was no self-goal to work on a task.

The new-age employees want to be more involved in their tasks through self-development goals, learn more or simply work on their terms without being micro-managed. To put it in simple words, employees are motivated more when there is a sense of purpose rather than external factors.

Freedom to choose things that matter most to them. It is time to compensate people not only according to what they know or do but also to provide opportunities on what they want to work on.

Alright, is it right to conclude that money has no impact on a person’s engagement level?

It is not possible to make an assertive statement on such an important aspect of life as money. Money is needed to pay bills, put food on the plate, health care and almost everything. Most people are satisfied with the pay scale until the still family responsibilities have been taken care of. In fact, some studies show that money has a negative impact too. High pay with low self-goal leads to poor engagement & lower productivity

Sounds interesting, but do we have any proven use cases for the proposed ‘new’ approach?

Yes, large multi-national companies such as Google has been providing time to their employees with 20% of their bandwidth to work on projects beyond their current job description. And voila! some of the most interesting work has come from this self-time the employees got. They were more engaged, did not required any additional incentive & were more productive.

To begin, a leader should genuinely be interested in individual growth, be open to discussing projects which may not be in the same department, create opportunities & forum for the individual to interact with their role models in the company. Chalk out a tangible plan with short & mid-term goals and continuously help achieve the same by providing time, guidance & resources!

Bottom line:

In the era of knowledge, to ensure employees are motivated to work, a leader should open discussions around self-development goals, (these can be as simple learning a new programming language, or even attend a guitar class in the middle of the day!! ) work together with the employee and help develop a roadmap with a clear plan of action with expected outcomes. And if these outcomes align with any of the organization initiatives, voila, we have a win-win situation for both the firm & the employee.