I read a recent article by Liz Ryan published in Bloomberg Businessweek (see http://buswk.co/YyfkXp for the original article) which had the title “because employees can’t be trusted”. It highlighted how ludicrous the command and control techniques are that companies use to prevent their employees from, as they see it, “taking advantage”.
It made me think about how we focus on the problems caused by the minority so that we treat our employees in a reverse Pareto way. If you’re not familiar with it, Pareto observed that in most relationships approximately 80% of the effect of activities comes from 20% of those activities. An often quoted example of this is that around 80% of the profit in most businesses are generated by 20% of their sales.
I don’t know if anyone has ever looked at this for employees, but my bet is that 80% of the problems come from 20% of the employees, and this distorts our view of the general workforce. We devise complex and costly procedures to try to control their wayward behaviour, and completely ignore the effect that these controls have on the majority. In doing so we send a message to those employees, no matter how diligent and hard-working you are, we have no respect for you and we know that you will take advantage of us at the first opportunity. If you have ever been on the receiving end of this type of message you will know how damaging this is.
I recall a classic example from early in my career when our personnel system required a “back to work interview” for every employee who had more than a week off work due to illness. There was no discretion allowed, because it was believed that managers would take the easy way out and find a reason not to undertake the interview. In other words they didn’t trust us either! The employee in this case was a supervisor with 20 years service who had been off sick following an operation. This employee had not had a day off in 15 years, and was one of the most reliable and conscientious employees in the factory. You can imagine her reaction when she was treated like a naughty schoolgirl. Despite my best diplomatic efforts to sugar the pill, she was incandescent. I doubt that the company ever got any discretionary effort from her after that, and it certainly destroyed the previously good relationship we had.
I often see questions like “How do I motivate….” being asked on internet and LinkedIn forums. The answer is easy, stop doing this sort of thing! Focus less on the rotten apples and concentrate on the 80% of employees who don’t cause any problems. If you start to create an environment where that 80% feel that they are part of the solution and not part of the problem, you will find that they will fully justify your faith in them. Not only will their performance take off but they will start to take responsibility for controlling the wayward 20%, because they don’t want their hard work spoilt, and the peer pressure they will exert will be far more effective than anything your system can deliver.
A prime example of this was given to me during a tour of the Jaguar Land Rover factory on Merseyside. This had once been a Ford plant with a poor reputation for quality and employee relations. It had all the usual multinational controls which had absolutely no effect on the poor quality, high absenteeism etc. etc. When it was decided that the factory should be converted to manufacture the new Jaguar range, following the acquisition of Jaguar by Ford some years ago, a great deal of effort was put into changing the culture of the plant into one which would produce high quality vehicles. The hard work paid off, and this plant is now highly successful, with largely the same workforce previously employed to make the old Fords. Several things struck me about this tour. One was that the person leading the tour was not a manager, but someone drawn from the shop floor, another was his obvious pride in the work they were doing, and third was his comment that some of the old workforce couldn’t make the transition and had decided to leave. Rather than being forced out by some management process, peer pressure had resulted in their decision.
I am sure that like any organisation there were still things that could be done better, but it is still a great example of what happens when you get the employees on side, and the success can be seen in the fact that sales of cars from this plant are growing rapidly, despite the economic situation, and they are expanding capacity and taking on additional staff.
Monetary incentives are not the answer
25/03/2011The title of this post is perhaps a rather extreme statement but I recently came across a study carried out by MIT which concluded exactly this. The study confirmed the management theory postulated by Maslow many years ago that money is a satisficer i.e. you need to pay enough to enable your staff to meet their needs for the necessities of life but past that point using money to try to motivate people just doesn’t work.
The essence of the study, which by the way was funded by that socialist leaning organisation the Federal Reserve Bank of the USA, was to study a group of students who were given financial rewards to excel at a range of tasks. These included tasks which involved purely mechanical skills and others which required some thought (cognitive skills). They received a small reward for performance which was OK, a medium level of reward for good performance and the highest reward for excellent performance. The results showed consistently that paying for performance for purely mechanical tasks did in fact improve performance, but as soon as even a modest amount of cognitive skill was required larger rewards produced poorer performance.
Of course this could be put down to the fact that the rewards were not adequate to motivate a student who could afford to study at MIT. However when the experiment was repeated in India with poorly paid workers where the rewards were 2 weeks salary for OK performance, one months salary for good performance and two months salary for excellent performance the results were exactly the same. Where the tasks required even basic levels of cognitive skill the lower and medium reward level produced similar levels of performance and the higher level of reward produced poorer performance.
So here we have clear evidence that the main incentive offered by most businesses for improved performance only works where the task is repetitive and requires no thought whatsoever, and since most of those tasks have long been outsourced to low labour cost economies it would seem obvious that we should be focussing our efforts elsewhere. Not only do they not work but there is a great deal of evidence of the destructive power of financial incentives. You only need to look at the results of huge bonuses in the banking sector driving reckless activity and risk taking to confirm that. On a more mundane level I have yet to see a sales performance target that isn’t manipulated to maximise payments by using often very ingenious methods which have nothing to do with delivering the objectives of the business.
As I said above this is not new, I was being taught Maslow’s theory over 30 years ago, although I have seen little evidence of it being adopted in the interim period, and similar things were being said by other widely read and taught academics like Hetzberg, Deming etc. The essence of their proposition is that what motivates people to perform is in fact things like the level of autonomy they exert over their work and the sheer pleasure they get from getting better at doing things.
So now there is experimental evidence to support what some of us have long known intuitively, or from personal experience, that money incentives are not the answer. The problem is that the money incentives are so much part of “the way we do things round here” that they are seldom if ever challenged, and of course taking away something that has become an expectation would be a disincentive. Being cynical you could say that throwing money at a problem is easier than the thought and effort it requires to develop more imaginative ways of managing that release the potential in the workforce.
While there is much talk about engagement and its measurement, the changes to management practices required to produce it in a sustainable way are not widely understood or used. Until that changes it looks like monetary incentives will remain the widely accepted method of trying to improve performance despite evidence that they do not produce the required results.
Tags:Human Resources, Management, motivation, performance improvement, workforce engagement, workforce ownership
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