Erez Yoeli, Moshe Hoffman, David Rand, and Martin Nowak have conducted a fascinating new study that suggests reputation sometimes can be a bigger motivator than money. They conducted a field experiment associated with a utility company's program in California to try to prevent blackouts. Some individuals were offered financial incentives to participate. For other individuals, sign-up sheets were posted in common areas of apartment buildings. Financial incentives did boost participation in the program. However, the sign-up sheets had a much more significant impact! Rand explained to the Harvard Gazette: “When people know it’s a cooperative effort, they feel peer pressure to take part. They think, ‘If I don’t do this, I’m going to look like a jerk.’ But if it’s not observable, then there’s no problem with not participating.” Making behavior observable brings reputation to the forefront. People care a great deal, in many cases, about how others perceive them. Hoffman explained that Toyota may have used this self-perception concern to its benefit when designing the Prius. “In fact, we think this is one reason why the Prius, for instance, is such a different-looking car. The designers at Toyota seem to have intuitively had this idea: designing a car that didn’t look like any other car so your neighbors can tell you’re driving a hybrid."
Showing posts with label incentives. Show all posts
Showing posts with label incentives. Show all posts
Monday, June 17, 2013
Tuesday, March 5, 2013
The Dark Side of Employee Awards?
Posted on 6:41 AM by Unknown
Timothy Gubler, Ian Larkin, Lamar Pierce have conducted a provocative new study regarding employee awards. They collected data about an attendance award program at a private commercial laundry services company in the Midwestern United States. One of the company's five plants chose to implement an award for good attendance. Managers wanted to reduce absences and tardiness. The other four plants did not institute this program. The program was rather simple. All employees without an unexcused absence or tardy in the prior month received recognition before their peers, and they became eligible for a drawing for a $75 gift card. The program lasted for a bit less than a year. Senior executives at the company eliminated the program because they felt it rewarded behavior that should be expected of everyone.
The scholars studied this program, and they found that the award produced two important unintended consequences. Here is an excerpt from the paper's abstract:
First, employees game the program, improving timeliness only when eligible for the award, and strategically calling in sick to retain eligibility. Second, employees with perfect pre-program attendance or high productivity suffered a 6% to 8% productivity decrease after program introduction, suggesting they were demotivated by awards for good behavior they already exhibited. Overall, our results suggest the award program decreased plant productivity by 1.4%, and that positive effects from awards are accompanied by more complex employee responses that limit program effectiveness.
I don't think we should be surprised by these results. When creating any type of incentive or recognition program, we should remember the law of unintended consequences. Still the paper documents the phenomenon in a powerful way. I find it particularly interesting that this award program clearly created a perception of injustice. People felt that people did not merit recognition for simply showing up when they should anyway. Perceptions of inequity should be top of mind when creating reward programs. These feelings are likely to trigger discontent and unintended consequences.
The scholars studied this program, and they found that the award produced two important unintended consequences. Here is an excerpt from the paper's abstract:
First, employees game the program, improving timeliness only when eligible for the award, and strategically calling in sick to retain eligibility. Second, employees with perfect pre-program attendance or high productivity suffered a 6% to 8% productivity decrease after program introduction, suggesting they were demotivated by awards for good behavior they already exhibited. Overall, our results suggest the award program decreased plant productivity by 1.4%, and that positive effects from awards are accompanied by more complex employee responses that limit program effectiveness.
I don't think we should be surprised by these results. When creating any type of incentive or recognition program, we should remember the law of unintended consequences. Still the paper documents the phenomenon in a powerful way. I find it particularly interesting that this award program clearly created a perception of injustice. People felt that people did not merit recognition for simply showing up when they should anyway. Perceptions of inequity should be top of mind when creating reward programs. These feelings are likely to trigger discontent and unintended consequences.
Wednesday, January 2, 2013
Should You Purposefully Annoy Your Employees?
Posted on 5:45 AM by Unknown
Ray Fisman and Tim Sullivan offer an interesting anecdote in today's "How To Be A Better Boss" article in the Wall Street Journal. Fisman and Sullivan write:
Employees often wish managers were a little more understanding, but people tend to associate the idea of "understanding" with "nice." A little well-directed pain can be a good thing in getting workers to focus on the tasks they might otherwise choose to forget, and to increase overall productivity. Given that developers often prefer programs to people, Kayak founder Paul English says, making them deal directly with customers' questions drove them nuts. Once they heard the same complaint two or three times, the engineers tended to stop and fix the code. As an added bonus, after taking his turn on customer-service duty, an engineer can pass the phone—along with its grating ring—down the line for someone else to deal with.
What an interesting example! Of course, the phone calls work for reasons beyond the fact that they annoy the software developers. The phone calls create a direct line of communication between the developers and the users. Kayak has removed all the information filtering that often takes place between the users in the marketplace and the developers back at the office. Moreover, developers get a real sense of what is just a one-off complaint versus a real pattern. Too often, someone can shrug off a complaint from the sales force as an "isolated incident." However, in this case, the developers can begin to see that a pattern exists, and that the incident is far from isolated. Finally, the developers share the pain here. We don't have a few "problem-solvers" focused on fixing bugs. We have all the developers addressing bugs. Everyone is accountable, as opposed to having a small unit that worries about fixing bugs. The collective accountability goes a long way toward improving quality. Once everyone knows that they will have to address these calls at some point, it also makes people take extra care to get it right the first time.
Employees often wish managers were a little more understanding, but people tend to associate the idea of "understanding" with "nice." A little well-directed pain can be a good thing in getting workers to focus on the tasks they might otherwise choose to forget, and to increase overall productivity. Given that developers often prefer programs to people, Kayak founder Paul English says, making them deal directly with customers' questions drove them nuts. Once they heard the same complaint two or three times, the engineers tended to stop and fix the code. As an added bonus, after taking his turn on customer-service duty, an engineer can pass the phone—along with its grating ring—down the line for someone else to deal with.
What an interesting example! Of course, the phone calls work for reasons beyond the fact that they annoy the software developers. The phone calls create a direct line of communication between the developers and the users. Kayak has removed all the information filtering that often takes place between the users in the marketplace and the developers back at the office. Moreover, developers get a real sense of what is just a one-off complaint versus a real pattern. Too often, someone can shrug off a complaint from the sales force as an "isolated incident." However, in this case, the developers can begin to see that a pattern exists, and that the incident is far from isolated. Finally, the developers share the pain here. We don't have a few "problem-solvers" focused on fixing bugs. We have all the developers addressing bugs. Everyone is accountable, as opposed to having a small unit that worries about fixing bugs. The collective accountability goes a long way toward improving quality. Once everyone knows that they will have to address these calls at some point, it also makes people take extra care to get it right the first time.
Sunday, September 18, 2011
Are Gifts Better Bonuses Than Cash?
Posted on 6:37 AM by Unknown
The Wall Street Journal reports on a new study published in the American Economic Review. Sebastian Kube, Michel André Maréchal and Clemens Puppe conducted an experiment, in which they compared workers' productivity when given a bonus vs. those in a control group. Actually, they set up two different types of bonuses: a 7 Euro cash bonus and a gift of a thermos worth 7 Euros. They found that the workers promised the gift as a bonus were significantly more productive than those given cash, whether told the value of the thermos or not.
Now, one could conclude that the researchers have shown that gifts might have a better incentive effect in the workplace than cash. However, I think we need to proceed with caution - a great deal of caution! Here we have a simple experiment with the bonus only worth 7 Euros. Would the same effect hold in the workplace if the amount of the bonus were much more substantial? That's not clear to me at all. So, while the experiment may be thought-provoking, I'm not sure it provides us practical guidance as to how to design incentive schemes for the workplace.
Now, one could conclude that the researchers have shown that gifts might have a better incentive effect in the workplace than cash. However, I think we need to proceed with caution - a great deal of caution! Here we have a simple experiment with the bonus only worth 7 Euros. Would the same effect hold in the workplace if the amount of the bonus were much more substantial? That's not clear to me at all. So, while the experiment may be thought-provoking, I'm not sure it provides us practical guidance as to how to design incentive schemes for the workplace.
Monday, July 11, 2011
Incentives for Crowdsourcing
Posted on 3:56 AM by Unknown
The Boston Globe reported Sunday on an interesting new Chinese study about crowd sourcing. Professors Zhang and Zhu examined the behavior of non-Chinese after the Chinese government blocked it's citizens from seeing or using the Chinese version of Wikipedia. It turns out that non-Chinese reduced their contributions significantly. The scholars conclude that the size of a potential audience affects substantially individuals' incentives to contributeopening source projects.
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