How Functional Are Your Reward Systems?

Jann Freed Leading Comments

Watching and reading about Facebook, Wells Fargo, and other companies in the news for acting illegally, unethically, or inappropriately inspired me to write this post about reward systems.  

If you want to understand human behavior or why people act the way they do, study the reward system.  People behave in ways that are rewarded.  When you do this, you realize many reward systems are dysfunctional.

There is a classic article by Steven Kerr that I share in most leadership workshops and courses titled “One the Folly of Rewarding A, While Hoping for B.”  It was written quite a while ago, but interestingly it is still relevant.

It describes how we want teamwork, but organizations usually reward individuals.  In higher education, the public expects good teaching so students learn, yet faculty members are usually rewarded and recognized for research unless at primarily a teaching institution.

Eron is a perfect example of people acting in ways that were rewarded–unethical ways.  If you have not seen the documentary titled “Enron:  The Smartest Guys in the Room,” I recommend it.  It clearly reflects how the reward system motivated people to act in unethical ways.

A more current example is Wells Fargo. How were employees at Wells Fargo rewarded?  Based on what metrics?  Then you can understand why people behaved the way they did and why Wells Fargo is facing significant fines.  How was Facebook making money and rewarding employees?  Then you understand how and why data was shared in ways the public did not fully realize.

A few years ago, I interviewed senior leaders for organizations that had received the International Spirit at Work Award.  One example I remember involved an organization that did not count days for illness, but rewarded employees with a certain amount of days for NOT being ill.  While this is a small example, it makes the point of rewarding people for desired behaviors.

Reward systems are just that–part of a system which is made up of interconnected parts.  Systems need to be carefully examined to determine if they are working in desired ways.  The system should be functional and not dysfunctional and unless the system is analyzed,it is hard to know the difference.

What are the desired behaviors of employees?

Are you rewarding those behaviors?

If not, how can you reward those behaviors?