Rewards and incentives - when self-interest isn't enough

2009

It would be logical to assume that targets can be drawn up for any manager in order to set out how they go about achieving excellent results and the rewards that will follow from success – as well as the fate that will accompany any failure. However, exactly what measure of excellence should be applied?

Certain tests are reasonably secure for the purposes of rewards and incentives. For example, a marketing manager can be asked to produce targets for sales and profits according to each product line. Rewards can then be linked to the success or failure of the manager in reaching those targets. The absence of such focused plans is a sign of poor management. But there aren't many chief executives who get this treatment.

But it is nevertheless crucial to set standards and drive effort forwards. There is an incentive effect in this approach, but that is a secondary result of a commitment to achieve the best possible results.

A logical trap is neatly avoided in this way. Say the above marketing director had a bonus scheme in addition to a salary. Do you suppose that, in the absence of a big fat bonus, the executive would attend to his duties with less attention, commitment and desire?

Would you take on or retain any well-rewarded worker whose performance didn't match their ability and potential? After all, this is a very common problem, neatly illustrated by the Performance Matrix.

On one side of this matrix is CAN DO and CAN'T DO. Is the person capable of carrying out the function concerned, or do they lack ability? On the other side of the matrix, a key question is asked which addresses the employee's motivation. Is this a WILL DO individual? Or is it a case of WON'T DO?

No incentives or training will have much effect on a WON'T DO, CAN'T DO person. So you can lose them without regret, other than cursing your own error of hiring or promoting them.

Of course, what you need is a CAN DO, WILL DO person. This person, by definition, is an achiever who does not depend on material reward as a means of motivation. This person will produce good, top-line results simply because he or she is a good top-line person.

If you can hire or team up with CAN DO, WILL DO executives, incentivising them is not going to pose a problem because they will simply incentivise themselves – which historically was the common root of all incentive schemes.

Self-interest is a powerful engine of economic performance, but it is far from being the only one. Many other parts are necessary for the economic motor to run smoothly – like teamwork and delegation.

These components are capable of transcending self-interest while still drawing upon the selfish personal drives. All achievements carry a selfish element. Few things in life offer more personal gratification and satisfaction than bringing an organisation or project to the point of thrilling success.

The bonus kings of banks and big business will perhaps in time come to understand their dependence on the people in every organisation who possess other talents and without whose contribution nothing great can be achieved – and whose true value cannot be measured in money alone.

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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".