Incentives- Choose Wisely

“The rabbit runs faster than the fox, because the rabbit is running for his life while the fox is only running for his dinner.” — R. Dawkins

Simply put, incentives matter a lot. Incentives are at the root of a lot of situations we face and yet we often fail to account for them. They carry the power to distort our behavior and blind us to reality. It’s imperative that we think very literally about the incentive systems we create. Remember that incentives are not only financial. Frequently it’s?something else: prestige, freedom, time, titles, sex, power, admiration…all of these and many other things are powerful incentives.

We can only see a situation with true clarity when we take the time to carefully consider the interests at hand. And we understand it even better when we consider how the situation might be different if the underlying interests were different. Incentives become the root cause of a lot of situations we face and yet we often fail to account for them. They carry the power to distort our behavior and blind us to reality.

My favorite example is that of Fed Ex. One of the most critical aspect of Fed Ex business is to get the airplanes at one place and shift the packages from one to another. A delay in this causes enormous dissatisfaction at customer end. This portion was always screwed up and always caused delays initially. From Threats to moral obligations to you name what was tried and failed. At a much later stage, someone got the idea to look at this operation as one big teamwork and look at incentive as per shift and accuracy rather than individual.?Voila, 99% customers satisfied with less than 3% delays.

A couple of more examples shared in a post here ( https://www.dhirubhai.net/posts/amit-sharma-79888349_rewards-incentive-bonus-activity-6981110899159773184-FPm3?utm_source=share&utm_medium=member_desktop). ?

The?principles for an effective incentive work across the board. Lets change the thinking and look at the ways why it could fail. First, most of them are hard to explain. They are overly complicated and wordy. Albert Einstein most famously said “If you can't explain it to a six-year-old, you don't understand it yourself.” Second , the program has to be designed in a way that the people in it (and the people running it) can’t game it. Thirdly, everyone is subject to the same plan.?Lastly, most incentive says that one must perform as a team as we have shared destiny but the implementation says every man for themselves. Wonder why are companies surprised when team work goes down and Silos get created?

Done poorly, compensation systems foster a culture of individualism and gaming.?Done properly, however, they unleash the potential of all employees. Choose Wisely!