The Perils of Rewards

Reward programs have been synonymous with suggestion systems since the 1800s. The first ever formal program, at W M Denning Shipyard in Scotland, offered small financial rewards for implementable business ideas, a useful supplement to the income of shipworkers.

In recent years, important research into rewards and behavioral psychology by Alfie Kohn has revealed the darker side of incentive programs. His book, "Punished by Rewards", describes vividly the problems of prescribing tangible incentives to motivate good behavior, or to dissuade people from negative behavior.

We have found that common pitfalls concerning rewards in Idea Management initiatives include the following:

• Winner Takes All: One single prize is a great incentive, but everyone else, from second place onwards, is considered a loser.
• Money Talks: Financial rewards are quite common, but you must take care to pay attention to the level of rewards. One client offered US$ 1,000 for the top prize... for their African subsidiary. That was the equivalent of $10,000 in local currency. It is hard to motivate the same group to contribute the second time round - a $50 Amex voucher would have achieved the desired result better.
• YAP (Yet Another Plaque): Plaques can be very effective for some people, but an insult to others. Use this incentive with caution - people can tell when their special award has just been run through a laser printer.
• Cost Accounting Rules: Many manufacturing firms use a percentage of cost savings as the primary reward. This has a number of positive effects, many of which unfortunately can be overwhelmed by the negatives. You need a lot of accountants to really measure the benefits. You need an appeal process to manage disgruntled employees. And sometimes you end up with the difficult task of explaining to senior management why a line worker has just tripled his or her salary from a seemingly obvious idea.

A good reward system can be a powerful motivator. We have done a lot of work to gauge the best way to manage rewards, particular for non-cost saving ideas. This is an area that we will investigate in more depth in the future!

If you have any ideas, feedback, or concepts you would like to share, please e-mail research@imaginatik.com.

If you would like more information on our Rewards Module, please look at the Products & Services section.

Reference:The Perils of Rewards - RN-0702-1