The Senior Sales Executive resigned after collecting his incentive cheque …
The Manager was shocked. “I have given him 100% incentive, and how can he do this to me?” After a few days, the audit team found out many irregularities in booking the sales orders by the Senior Sales Engineer. He has given false commitments, booked dummy orders without advances ..etc. This happened few years ago. The company brought in systems and checks before incentives are paid. Employees started complaining that incentive schemes are very bureaucratic and don’t motivate.
How Often have we come across such situations …
This reminds me of the Cobra Story:
Once there was lot of snake menace in a kingdom. The ruler ordered one gold coin reward for every snake that the citizens catch and handover to the guards. The citizens were happy to catch the cobras and get rewarded. After sometime when the ruler was reviewing he found more and more cobras are getting caught everyday and the numbers are not coming down. He sent his minister to find out the causes. The ministers found the citizens have started breeding cobras to get rewards. There are many cobra farms that have come up in the kingdom. This is the Cobra Effect.
Sometimes a well-intentioned intervention can have the opposite effect of what it is designed for.
The other problems that we have seen in an incentive scheme are should it be individualistic or a team incentive. Individual incentives creates silos, whereas team incentives promote social loafing (a condition where some members do not put in their best efforts).
What is Purpose for which we Incentivise?
If it is for motivating employee to perform better, then the simple question is does it do? We need to have an honest deliberations on outcomes of our current incentive schemes and what it has achieved. Did it bring in better performance? Did it reduce attrition? Did it encourage teamwork? Are our employees happy with our incentive scheme. Answers to these questions will help us to move from herd mentality to finding unique solutions that suits our needs.
It’s time to Re-think on our current Incentive Model…
