Performance incentives may do more harm than good.
In the summer months I drive a 40-year-old British sports car and occasionally it will backfire. A backfire happens when the car’s internal combustion engine decides to have a moment of external combustion and the whole neighborhood hears about it.
There can be many reasons for a car to backfire: wrong air/fuel mix, spark plug timing or just an exhaust problem. When it happens, I know the car is not performing at its best and something needs to be addressed.
The same thing can happen in the workplace with performance incentive plans. They sometimes backfire, and that backfire turns into real-world blow-back with significant consequences. Recent examples have happened in the banking industry:
- Wells Fargo fined $185 million for pressuring employees to sell.
- TD Bank faces allegations that its employees broke the law to meet sales targets.
The purpose of performance incentives is to encourage employees to display behaviours that are above the basics of task behaviour. In the HR world, we call this organizational citizenship behaviour. When we think of the citizenship behaviour we default to a very positive image of workers going above and beyond the call of duty. But, in reality, going above and beyond the call of duty can have disastrous effects when it is linked to a poorly developed sales incentive program. Poorly designed programs can create very successful anti- citizenship behaviour that supports the dark side of business plans.
Both TD and Wells Fargo had well-intentioned sale incentive programs designed to raise organizational performance in terms of profit. However, for both organizations, the profit motive became unhinged from the organization’s ethics and negative things happened. Employees become whistle-blowers and companies now face the blow-back of legal action, ethical complaints and very bad public relations.
There is always a right and a wrong way to implement a performance incentive program in an organization. When the company gets it right there is recognition as a top employer. When the company gets it wrong, there is always blow-back.
- Do some research and find a workplace incentive plan that went wrong. Compare and contrast what went wrong to the Society of Human Resources Management (SHRM) suggestions on how to implement an effective incentive plan.