Professor Michael Gibbs, an economics professor at the Chicago Booth School of Business, has published research in World at Work Journal (Fourth quarter) entitled Designing Incentive Plans: New Insights From Academic Research which shows that, to be effective, incentive programmes must be rooted in effective and accurate evaluation and reward.
At this point, Victor Tardieu of incentive company Full Circle Motivation completely agrees.
Gibbs argues that two conditions must be met for incentive programmes to motivate staff: First, an employee must be able to see that their efforts, decisions and actions are actually being measured accurately. If they aren’t, the inevitable result is the opposite of the intended one: a decrease in motivation. Secondly, the performance measurement must be tied to rewards that employees themselves consider significant.
This is where Tardieu takes a slightly different course. He comments: “accurate measuring and monitoring is vital however to be effective, performance measures needs to be ‘mirrored’ back to participants so that they really see what their performance looks like against their peers. This second stage of communication (or mirroring) needs to be regular and frequent engendering a desire to leapfrog peers in the same league. It is this leapfrogging that increases performance.”
Tardieu continues: “but without communication the programme dies, no matter how good the measurement or the reward. In fact, programmes can be run without reward altogether providing the key elements of measurement and communications are present”. Tardieu does concede however that reward can be a powerful stimulus because sometimes “it isn’t just the thought that counts.”
This doesn’t mean that the rewards have to be massive, Professor Gibbs maintains. But the first step always lies in performance measurement – rewards must be tailored to and dependent on these metrics. A small number of performance measures should be incorporated into the evaluation, Gibbs suggests, preferably with a numeric value attached in order to give employees clear feedback. Subjective evaluations alone tend to be more ambiguous and less likely to spur employees onwards, but in combination with numeric measures, they can work wonders.
The third stage of incentive programmes design involves calibrating rewards, both implicit and explicit, to evaluation scores. The clearer the link between reward and score is made, the more effective the plan becomes in motivating staff to excel.
As experts in the field of incentive programmes and performance measurement Full Circle is well aware that these schemes require meticulous construction to be effective: When employees are informed (that is, communicated with constantly) and are clear about what they’re aiming for and what the reward will be when they get there, staff morale and business results improve in line with one another.