July 2008 – Rewarding a job done well

A few weeks ago during a conference on employee benefits in Spain, the delegates were asked to vote on various propositions from the platform. To help us in our voting decisions we were all handed little calculator-like voting gadgets as we entered the room.

While I don’t remember the questions on which we voted, I do remember having difficulty understanding some of them. This might explain why my voting record at such events could be described as “apathetic” at best as I exercise the audience member’s right to daydream.

Here, however, I could hide my ignorance behind the anonymity of the secret vote. Even better, I could register my choice – controversial or not - just as I do in a General Election, without having to explain to anyone my voting behaviour or the reasons behind it.

Imagine using such devices in the board room when faced with the kind of headstrong boss whose idea of consensus is to bulldoze policies through meetings, using a combination of fear and intimidation.

The boss probably wouldn’t allow it. But when management consultants introduce such methods it is regarded as a legitimate deployment of technology from their box of tricks. Mary Meaney, a partner specialising in performance transformation at the London offices of McKinsey & Co opted to use audience response technology among senior executives at a company she was advising during a change programme.

Asked whether the company had a clear and consistent strategy for the business, the answer was a unanimous “yes.” However, when asked, using the confidential voting technology to agree or disagree with various different descriptions of the strategy, the executives were divided with an even distribution over six different responses.

“The CEO exploded,” says Ms Meaney, ”but it brought out in to the open what had previously been hidden under the surface: no-one had any clear idea of what the strategy was. The next step was to sit down with the senior team and create a new strategy.”

One issue identified in the McKinsey work was the need for idea and process ownership. People like to put their own stamp on their work. If we’re expected to follow a process or strategy, at the very least we want to believe we can influence the way that it works.

Ms Meaney quotes research by Ellen Langer, a Harvard University-based psychology professor who carried out a study using lottery tickets among two groups of people. One group received tickets chosen at random whereas those in the second group were able to choose their own ticket. When asked to sell their tickets, the people who chose their tickets wanted up to five times more for the ticket than those with a randomly allocated number.

“It was their number and that made all the difference,” says Ms Meaney who argues that organisations need to understand the sometimes complex motivations behind such behaviours.

Too often employers misunderstand the nature of motivation. Nowhere is this more apparent than in pay structures. Pay is important. We know that instinctively. I am always sceptical of survey findings that downplay the significance of pay. It’s tempting to assume, when reward is listed behind factors such as “job content” and “working environment,” that it doesn’t matter so much.

Indeed most of us probably like to think that it’s not important. It’s not very seemly to confess that we might be motivated by greed. But our relationship with pay has less to do with greed and far more to do with perceptions of fairness.

In a new book, Sway, the Irresistible Pull of Irrational Behaviour, that I referenced in last week’s column, authors Ori and Rom Brafman point to research that links the lure of money to a different part of our brains than that stimulated by altruistic behaviour.

The chance of a big payout, whether it’s an end of year bonus or a big win on the casino tables in Las Vegas, stimulates a primitive part of the brain called the nucleus accumbens, sometimes described as the pleasure centre since it’s associated with the highs experienced from drugs, sex and gambling. Studies carried out by the National Institutes of Health, the US medical research agency, observed the way gaming rewards led to increased activity in this part of the brain.

In later experiments looking at different reactions to reward, scientists at Duke University in the US, asked their subjects to play a video game where the reward for high scores was a donation to charity rather than money for themselves. In this study, while the pleasure centre remained passive, strong activity was observed in the posterior superior temporal sulcus, a part of the brain associated with social interactions, human relations and perceptions.

This helps to explain the apparently contradictory outcomes of a study at an Israeli university where two groups of students were asked to undertake the GMAT exam used to access business schools. One group was simply asked to do the test whereas students in the second group were given a small financial incentive – 2.5 cents for each right answer.

The unpaid students produced consistently better results. The financial reward backfired and acted as a disincentive, possibly because those receiving it decided they were being offered a derisory amount.

The Brafmans liken the results to a situation where friends may turn out as a favour to help you move house. If, on the other hand, you offered to pay them £10 each for the trouble, the likelihood is that they would feel insulted - that their generous nature was being somewhat exploited.

This is one reason why many companies have adopted gift-giving and vouchers as a way of rewarding employees for exceptional performance. Stephen Humphreys, managing director and Steve Baker, new business director at Projectlink Motivation, a company that specialises in non-financial rewards, argued at the Jerez-based Employee Benefits Summit 2008, that cash reward is not visible enough to reinforce recognition.

Instead they advocate the use of speedy recognition. Surprisingly many employees do not want the Earth when they are rewarded with redemption vouchers. When exchanging vouchers choices vary between nationalities. The most popular redemption item in Spain, they said, is a cured ham. In France it is fine wine while in the UK it is a paper shredding machine. What does that say about the British?

Bigger ticket items range from having a stand-in part, drinking in the Rovers Return in Coronation Street, to flying across Russia in a Mig fighter jet. In some respects this kind of recognition has less to with a fair day’s pay and more to do with the old TV series, Jim’ll Fix It.

But underpinning much of this work, whether in reward, or in organisational transformation, are perceptions of natural justice and fairness, what Mary Meaney calls the “human component” that is often mistakenly described as the soft side of management. There is nothing soft about it.

See also: Pay and recognition