The plan was implemented, and two years later I had a chance to speak with the CEO about its effectiveness. The results were, well, judge for yourself:
The advisor who was good at bringing in new clients continued to be good at it, and now was also making a lot more money for it. The two advisors who were OK on the business development front continued to be OK and were quite happy with the plan. The dozen advisors who were not bringing new clients to the firm before were still not bringing new clients to the firm—yet they had become quite angry.
If leaders want to change employees’ behavior, particularly to make big changes, they usually require multiple tools. Let’s call them “levers.” Using only the monetary lever is not only ineffective but can be counterproductive. There are at least two others that should be used to create changes—the levers of culture and management.
Before we explore them, however, I would really like to throw at least a couple more rocks at the notion that incentives can change behavior in the long term. I was a smoker for almost 20 years (I started at 15—not exaggerating). Quitting smoking is very problematic for smokers. Mark Twain reputedly joked that “quitting smoking is the easiest thing in the world—I have done it thousands of times!”
The thing is, most smokers want to quit. There is no dispute or argument even among smokers that puffing a cigarette is bad. Surveys suggest that 70% of smokers at any given point in time want to quit, but only 2% to 3% succeed in any given year. Clearly, this is a very big behavioral change and it goes into the territory of addiction, dependence, the biochemistry of the body and the neurochemistry of the brain. Still, perhaps so do a lot of other changes we want to see in an organization.
In 2005, researchers from the University of Pennsylvania teamed up with GE to offer financial incentives to GE employees who quit smoking. The results were remarkable. The researchers enlisted 1,900 volunteers and paid them up to $750 in incentives structured over the course of a year for the completion of abstinence milestones.
The results were very telling. First of all, the incentives improved the “quit rate” by three times! The money made smokers three times more likely to quit! But this still means that only 15% of smokers actually quit. For 85% of the participants, money made no difference at all!
What’s more, in a similar program in Switzerland the researchers achieved similar results—i.e., increased success with rewards—but they also noted that all the effects of the program were lost once the incentives ran out. The more abstinent paid non-smokers quickly lit one as soon as the money stopped coming.
And this is another lesson about Scooby snacks—if you are going to use them, you better not run out!
Another great example comes from the excellent book Drive by Daniel Pink. In the book, Pink describes an experiment from the 1940s. In it, researchers were preparing to test the problem-solving abilities of rhesus monkeys and placed puzzles in their cages. What they found was that the monkeys immediately took interest in the puzzles and started trying to solve them. Within two weeks, the monkeys were puzzle-solving champions.