Daniel Pink, the author of Free Agent Nation says, “Typically, if you reward something, you get more of it. You punish something, you get less of it.” I see this motivational scheme in every organization that I work with. When rewards are done well, magic can happen. Teams can achieve far more than they ever thought possible. However, when parts of this equation aren’t well aligned, then the entire motivational scheme comes into question. Unintended behaviors and actions happen – just because of the mis-alignment between rewards, punishment, and results.
I work with several organizations that provide direct services to clients. The Sales organization scopes the service contract and prices it out. Once the sale is done, they hand-off the client to Services. The Services organization is not involved with any part of the sales process. An appropriate reward for them would be delivering to the client the promised services on time. However, in this case, they are actually rewarded and punished for delivering revenue. Even though they don’t set up the contract, set the slate of services, price the services, or settle the contract – they are responsible for delivering the revenue. Yes, you read correctly, while they do not impact or influence or solicit revenue in any way – they are being rewarded or punished for revenue.
This is demotivating at best and a train wreck at worst. It is demotivating to be punished when the revenue targets aren’t being reached – especially when you can’t do anything to increase the revenue. Teams may even give up trying to get great results. The train wreck comes when Services tries to square the revenue circle by decreasing expenses. Don’t get me wrong, providing the services in a cost-effective manner should be one of their goals. But, when you are punished for low revenue and you have no control over producing revenue, you move to the other side of the equation. And I see two behaviors that come out of this – cheating or cheaping out.
With cheating, the organization makes it look like revenue is higher – especially when the numbers are close – usually it is called ‘rounding up’. When the numbers are farther away, then the cheaping out happens –sacrificing common sense just to save a few pennies. The cheaping out typically impacts the organization’s ability to deliver their services reliably and/or with good customer service. This can also lead to dumb short-term decisions that you are stuck with for a long time – like minimizing the upfront cost for a software support tool that leads to ongoing problems with customer service and reliability. In either case, the obvious solution for low revenue is to ‘grow the top line’.
For a Service organization there are many ways to reward them for the correct results. They could be rewarded for profit vs. revenue; or for ensuring that the customer invoicing is done correctly and on time; or for providing excellent customer service so that the customer does repeat business. Any of these would be directly actionable by the Service organization. For successful delivery of results, the goals and reward/punishment must be aligned. The team must know what they are responsible for; have clear measurable goals; understand how their actions link to the reward or punishment; and they must have the power to deliver what is being rewarded. Doing this enables the team to self-monitor being on track or not, and then self-correct if they are off target – so that they get the expected reward or punishment. They become more autonomous and empowered.
The next time you aren’t getting the results you want – check out the rewards that are provided. Ask yourself, ‘If someone wanted to maximize the reward, what things would they do?’ If those things don’t produce the results that you want, look at the alignment. Align the rewards and punishment with the appropriate results for your team and watch them go!