On high performance - Rewards

In the last post, we saw the factors that motivate people, and how to apply that understanding to motivate teams. In this and the next post, we will examine two means to promote good/useful behaviors (and thus, high performance): rewards and feedback.

Aligning rewards with good behaviors is important for two reasons:

• Provides reinforcement: encourages good behaviors, and dissuades bad behaviors. 
• How many types of reinforcement are there? (research by Ivan Pavlov and B.F. Skinner)
• Positive reinforcement: Good work begets good rewards
• The best type of reinforcement; gets results consistently and continuously
• Negative reinforcement: Good work begets removal of pain
• Punishment: Bad work begets punishment
• Generates resentment, turnover, sabotage, stress
• Behavioral changes potentially unsustainable 
• Use with caution; can be used effectively 
• When you publish guidelines to eliminate bad behaviors
• Racist remarks etc. 
• Apply as soon as transgression is made, and communicate rationale
• Provides encouragement/incentives to employees, and helps maintain high motivation levels. 
• Fairness
• Why is it that this maintains high motivation levels? Let's say we rewarded arbitrarily; it would offend our sense of fairness (because we tend to do social comparisons), and we feel unhappy. 
• See the experiment on capuchin monkeys here. 
• Another example is the outcome at Gravity Payments where a minimum wage was set high enough, and high performers left because they thought it was not fair. 
• See the concept of equity by John Adams. People seek to minimize the ratio of input/rewards, and are "hardwired" to compare their ratio with others. 
• Lack of fairness has several negative consequences
• Burnout
• Stress (directly linked to heart diseases etc.) 
• Absenteeism
• Theft
• How to address a situation where the perception of lack of fairness occurs?
• Get people to shared understanding with respect to inputs (experience, education etc.) 
• Make sure inputs are relevant (effort is not, outcomes are). 
• Make sure rewards are what the person wants (recognition wanted vs pay given is not good)
• Communicate when there is temporary inequity (for example, communicate when only half-pay is given; see research here).
• Make sure to maintain equity in the long run, of course!
• Folly of rewarding A while hoping for B
• We also need to make sure we do not mistakenly/actively reward bad behaviors. This is the folly of rewarding A while hoping for B. Some examples:
• Rewarding short term deliverables, while hoping for long term goods (stock market mentality)
• Stack ranking that dissuades collaboration (bring down others to look better)
• Punishing mistakes/failures, while expecting innovation 
• Rewarding only individuals, while expecting teamwork
• Rewarding meeting goals, while expecting stretch goals (incentivizes people to set small goals)
• Rewarding "yes boss", while expecting candor
• Rewarding patents, while expecting innovation 
• Why does this folly happen?
• Fascination with instant gratification: we want to reward short term success, even though it may or may not be relevant to long term success.
• Fascination with objective metrics: such metrics are hard to devise for long term success, while things like #patents are easy to measure. 
• How do we make sure we do not do this folly?
• Know what behaviors you are rewarding, and identify misalignments. 
• Correct the reward system, to reinforce good behaviors, and dissuade bad behaviors.

Another fascinating question is when and how should rewards be given out?

• Traditional schemes are fixed interval (after certain time), or fixed ratio (after certain amount of work delivered)
• Variable interval, and variable ratios work better (one of the reasons people are addicted to slot machines). 
• Variable interval > fixed interval
• Variable ratio > fixed ratio (see example of grades who got a bonus at variable ratio, even though total compensation is same)
• Ratio schedules > interval schedule. Turns out to be good, but also allows you to reward work done as opposed to effort put in over time.