Tap Employee Expertise When Designing Incentive Systems

BY Kathy Crosett
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If you’re managing Gen Z or younger members of the millennial generation, count yourself lucky. These team members want to be engaged, and you may have a more successful outcome if you tap employee expertise when designing your incentive systems. Since employees want to a say in what they do every day, they may work harder when they feel they’re in control of their destiny.

Jillian Chown, assistant professor of management and organizations at the Kellogg School of Management at Northwestern University, researched the incentive system topic. Specifically, Chown studied the success of incentives developed by managers exclusively. Their goal was to convince their team members to work in a specific way. Though Chown’s research applied to a health care setting, incentives are widely used across all verticals to change employee behavior.

The Problem with Incentives

A typical incentive system often focuses on output.  For example, if an employee successfully completes a sale to a specific number of customers in one day without making any mistakes, they might be eligible for a bonus. The problem with many of these incentive systems is that managers frequently develop them in a silo. They're obsessing about profitability and efficiency. In most cases, they may not have personally done the job they are making decisions about.

Without intimate knowledge of what happens during each sale, managers may be missing a few key points. And those points can make the difference between incentive program success and failure. When you announce your carefully designed incentive system, you may be crushed to realize your employees aren’t excited about it. Your team members will quickly figure out if they have any chance of achieving the stated goal and earning the bonus. If the chances are too low, they won’t change their behavior. And as a manager, you lose credibility. Why? Because you made it clear that you don’t understand what your employees struggle with on a day-​to-​day basis.

Tap Employee Expertise When Designing Incentive Systems

One way to correct this problem is to include your team members in the decision-​making process. Ask them what they think is going to work. When you give your team members ownership in the design of your incentive system, you improve outcomes in two ways. First, your employees feel validated. You’ve acknowledged their expertise on the details of their positions. They’ll respond by sharing insights on where improvements in the work process can be made and incorporate those suggestions into the incentive program. Second, because your team members designed the program, they’ll be more willing to work toward a bonus or whatever the reward is. That’s because they have a vested interest in making sure the program works.

Managers might hesitate to use this approach. As Chown acknowledges, “Allowing and encouraging employees to shape or co-​create behavioral controls may mean more work for managers, but the extra effort is worth it.” While you will likely have to invest added hours in this process, one outcome will be higher productivity. You can also consider this effort to be part of employee development. As employees help to craft the incentive system, the overall goals of the organization become clear. They’ll also learn to think about solving problems from a different perspective. These novel approaches give your younger team members more reasons to be loyal to the organization.