I see incentives as an intersection of two traits
How predictable are they?
How accurate are they?
Do I know of them beforehand
Can I predict what they are
Do I have an understanding of how it works
Are they correctly measured?
Are they accurately delivered?
Are they tracked correctly?
If you think of a 2×2 matrix
The worst box clearly is the unpredictable-inaccurate box
This will lead to noting but resentment. And ultimately failure to drive the intended outcome
But the best isn’t the predictable and accurate one
In my experience, the unpredictable and accurate box drives the best outcome
As humans, we so want to settle
To capture the known
To make things predictable
And so with predictable incentives – it quickly becomes the new normal for those who hit it
And that depresses the impact, because the ones hitting it drive a larger sure Kd the performance.
In other words
“We are measuring your performance based on sales at the end of this month”
Predictable: if you hit the target you get 10% incentive
Unpredictable: if you hit the target you will get an incentive
This approach may seem stupid, because why would anyone be driven some undisclosed incentive scheme?
And surely – they perhaps won’t be
Until, at the end of the month when they see that you reward the ones that hit their target (and some always will)
Leaving the next months’ incentive as a surprise again
Variable rewards, changing rewards, dynamic rewards, surprise rewards
These types, when matched with accuracy, work like magic!
People react best when they are rewarded when they least expect it.