Financial Incentives Won't Deliver Culture Change

Nov. 22, 2011
Lean consultant and author Lonnie Wilson says the benefits of financial rewards are short term at best and can't make up for poor management.

Do money awards motivate? Does being selected employee of the month drive desired behaviors? Does winning a free lunch for the best idea grow the number of good ideas filling up the improvement pipeline?

Financial incentives, individual awards and team awards are key components for many continuous-improvement or change-management programs. But whether they help or hurt as motivational tools draws mixed responses, with strong opinions on both sides of the debate.

IndustryWeek columnist Lonnie Wilson is among those who do not advocate the use of such reward programs. It's not that he is against rewards; it is that he believes meaningful intrinsic rewards are better than extrinsic rewards such as gift cards and small sums of money. Indeed, in a recent column he described financial incentives, individual and group award programs as "superficial and normally counterproductive."

Given the diversity of opinion about reward programs, IW asked Lonnie Wilson to expand on his views with regard to certain types of reward programs. His responses are peppered with references to psychologist Abraham Maslow's hierarchy of needs, and psychologist Frederick Herzberg.

Wilson has been teaching lean and other culture-changing techniques for more than 40 years and is author of "How To Implement Lean Manufacturing." He believes there is no place for financial rewards among North American workers.

"I think the dangers far outweigh the benefits, he says.

To develop and sustain long-term cultural change, Wilson says management must do three things -- model any actions they wish to see repeated, support those actions and reward those actions. That said, he believes many managers implement financial incentives in lieu of "the support and the modeling and the real rewards that people really want."

"Literally Try to Buy Them"

"So they literally try to buy them. Thats the purpose of most of the financial rewards. Unless you believe that people are naturally motivated by getting $5 for a kaizen idea," Wilson says. "A lot of people believe that; it just doesnt happen to be true."

At least not in the long term. In the short term, you likely will get benefits, but there is "a natural decay," he says. "Once a need has been met, it is no longer a motivator," he says with a nod to Maslow.

He notes an exception: Wilson says it is not true in countries where people are struggling simply to survive.

This is not true in China, where people are struggling for food. And this is not true for parts of Central and South America and Mexico, where people are living day to day," he says. "If you are in a place where people are struggling for survival, money is in fact a motivator."

"But most North American workers arent struggling for survival. They may be struggling to make a house payment or they may be struggling to keep their kids in college or they may be struggling to make the credit card payment," Wilson notes. "Im not saying they arent struggling, but theyre not struggling to survive. It is not a matter of life and death."

For that typical North American worker, the things that motivate him [long term] are more often intrinsic rather than the extrinsic motivators, Wilson says.

Intrinsic means that it comes from within. What people are looking for in their work, the lean consultant says, is a sense of accomplishment. "They want to have a sense of real purpose, in doing something worthwhile, toward the larger good. Those are the things that, in the long term, really motivate people, Wilson says.

But where is the danger in offering financial rewards?

The Danger of Stopping

There's the danger of stopping, Wilson says. If you withdraw the rewards, you simply annoy your employees. And if you don't continually increase the size of the reward, they cease to be a motivator, and they become really stale, he says.

Wilson adds that if management simply does its job right, there is no need to do anything beyond that.

If you provide an environment where people know what to do, they know how to do it, theyve got the tools to do it, theyve got all the resources -- these people will become engaged. They will naturally become engaged because thats what people want to do, Wilson says.

He provides an example: It's a manager's job to make it clear to employees what their work is, what constitutes good work and bad, when it is due, and provide that information in a framework that makes sense to the employees. Once they understand the what, the how and the when, then point out that the system isn't perfect and ask for improvement ideas.

Now you will get a million great kaizen ideas, because they are operating from a position of knowing, of understanding, Wilson says.

He admits that financial incentives can appear to be an inviting proposition. "It seems like a good idea, and since nobody works for free, you kind of think that more is better. And in the short term its true. In the longer term it is inconsequential.

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