Monday, May 26, 2008

Insights into Incentives

Modified from a fantastic book that has more to do with leadership than you might think... "Make it Stick" by Chip and Dan Heath, this insight into how incentives might be designed and responded to is powerful!

'Imagine that a company offers its employees a $1,000 bonus if they met certain performance targets. There are three different ways of presenting the bonus to the employees:
1. Think of what $1,000 means: a down payment on a new car or that new home improvement you've been wanting to make.
2. Think of the increased security of having that $1,000 in your bank account for a rainy day.
3. Think of what the $1,000 means: the company recognizes how important you are to its overall performance. It doesn't spend good money for nothing.

When people are asked which positioning would appeal to them personally, most of them say No. 3. ... Here's the twist though: when people are asked which is the best positioning for other people, they rank No. 1 mos followed by No. 2. That is, we are motivated by self-esteem, but others are motivated by down payments. This SINGLE insight explains almost everything about the way incentives are structured in most large organizations.'

Thanks Chip and Dan Heath for explaining how Contagious Leaders might want to re-think their incentive plans. Are you postioning the benefits of your company with a focus on how they (employees) might receive them or how you might like to receive them?

Stay Contagious!

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