Incentive strategy and managing mistakes


To what extend should incentives be used as a business strategy? Does motivation naturally follow incentives? Why are gross errors made and how can you protect against them? And how exactly can you use error as a foundation for excellence?

It is wrong to suppose that high intelligence is a protection against stupid behaviour. The harsh fact is that the brighter people are, the further they fall.

Extreme cleverness is often accompanied by arrogance, and that is one of the last character traits that people of power can afford to show. But many, if not most, do exactly that.

Managing the organisation to achieve the best possible corporate results is management's primary task, but in reality the quest for personal reward acts as a diversion.

The beneficiaries themselves can't always be blamed. If you hand someone a blank cheque and give him free rein to fill in the figures at his pleasure, he's hardly going to be overcome by modesty. The word is greed.

There is overwhelming evidence that suggests these sums, regardless of size, have zero impact on the quality of management. They might well have a potent effect on motivation, it's true, but that often works against the desired effect of an incentive strategy to stimulate collective performance. Motivation for a manager to accrue personal gain does not help the company at large and can instead become a hindrance.

Perhaps the most disruptive aspects of an incentive strategy that lack a true incentive element is that it not only demoralises those who don't share the rewards but it also tends to persist in the face of any criticism.

Negative incentives are of course an area of great concern as well as supposedly positive incentives which do not fulfil their purpose. However, there is no mystery as to the causes of poor motivation, or about whether it is present in a business. If you care to listen, the grumbling and unresponsiveness are deafening. And there are a whole host of highly trained consultants who can tell you what's going wrong with your strategy and why – but all their help will be useless to anyone who can't face hard realities.

Gross errors are made when people are in denial. Therefore, it follows that the best protection against error is denying the deniers. Often the latter are simply dealing in lies.

The Wall Street masterminds, when forced to confess their losses in the subprime market, mostly began with much lower numbers than those that are now becoming apparent (and quite possibly still growing). The denials serve no other purpose than to put off delivering the worst news.

That day arrives when the bad news must be delivered all the same. And the mark of the Supermanager is that not only does he admit his errors, but he tackles them with the same energy as his successes.

Persisting in gross error obviously sustains failure and also shuns opportunity. Positives can arise even from negatives – and this fact can act as the most powerful incentive and motivational force of all.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".