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How to Incentivize Good Work

3779982216_6f58d1f19c_mWow, what a huge topic! One of the most difficult, if not intractable, problems I face as CEO is how to incentivize my team to do “the right thing”.

To give some context to this, let’s consider a simple example:

I would like my Tier 1 Helpdesk staff to return phone calls with an hour to meet our First Response SLA for managed service customers.

Easy enough, right? I just need to line up an incentive for that and the problem is solved! So let’s work through this.

I would like my Tier 1 Helpdesk staff to return phone calls with an hour to meet our First Response SLA for managed service customers.

For every 1% above 80% we meet every day, I’ll pay the Tier 1 $5. So for 85%, they will get $25 that day in a bonus (i.e., incentive pay).

There you go. Pay the tech a cool $25 that day. Up to $100 using that incentive plan. Total possible cash incentive is $2000/mo or so. I can promise you a Tier 1 tech will be all over that. But, gosh, a bad thing can happen now because of what I’ve incentivized. When in a crunch, the tech will focus on over-delivery of the First Response SLA (say, trying to hit 99%) but NOT actually solve Tier 1 issues such as Password Resets or New Email Account since their time is limited.

They do this because I TOLD THEM TO. Specifically, the incentive is in effect me saying “When in a crunch, disregard solving customer issues even if you would have hit the minimum First Response SLA anyway, but instead hit 100% on the SLA no matter what pain you cause.”

That’s the problem with incentives. There can be very weird outcomes that you would not expect. Often, you won’t see those weird (often bad) outcomes until too late.

There are a million examples of this, including in marketing, sales, accounting, HR, and other areas.

So what’s the solution?

I’m not sure there is a solution here. The path I’ve taken is that if I test an incentive and it doesn’t have a positive result, I remove it. It just confuses the team and muddies the water. If I have an incentive that has a much higher positive result than negative, I’ll keep it. (One example of this is that I give pay raises for approved industry certifications.)

But I have more failed examples than successful examples. And that’s not the fault of the team. Any incentive that has no positive impact, or worse, has a negative impact is really the fault of the manager that implemented it.

But also, as I’ve grown as a CEO and manager I’ve learned that perhaps the problem isn’t so much “What is the incentive?” but more on whether “Do I have the right people that don’t need external motivation?” Learning that, albeit slowly, also has lead me to wonder “Do I have things in place to disincentivize good players from doing good work?”

So, really, should my energy be spent on thinking of ways to incentize people to do good work or on thinking of ways to remove things that disincentivize people from doing good work? Most likely, the latter. Good people just naturally want to do good work. You don’t have to motivate them to do it. But you can certainly demotivate them.

What’s the struggle you have around this topic? What’s been your solution? Let me know.

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