Friday, November 14, 2008

Incentives to affect lasting change!

I was at a forum discussing “Going green in Asia: How companies are responding to climate change”. Patrick Stahle, the Chairman and CEO Asia Pacific of Aegis Media spoke about “Green” and branding and the issues that companies need to think about when they claim to be “green”. One of the measures his company took to educate themselves about their impact to the environment was to measure the carbon footprint at each of their offices, and then encouraged a 20% reduction to the carbon footprint at each office.
A senior manager from a logistics company asked if Aegis gave cash incentives to their staff to achieve the goal. A lot of people actually nodded as though this was a good idea. I then spoke separately to senior employees of some other companies and many of them had the view that incentivizing employees with cash to set behaviour was a good idea.
Early in my career I used to believe that setting short term cash based incentives to achieve long term behavioural change was a good idea, until I saw that these incentives did not inculcate long term behavioural change. In-fact it did more harm than good because when the incentive was stopped after the goals were achieved, people got demoralized and drifted back to previous behaviour. This does not mean that you do not reward staff with monetary awards. But if you want to change behaviour in an organization, then short term cash rewards do not help.
The only thing that instils organizational behaviour change is education and perseverance with the team to affect change. The individuals in the organization need to understand how the change in behaviour helps them and they must want to change! If you think your employees should be paid more then just increase their salary with out gimmicks. But if you want to truly affect change then you need to put in the time and perseverance to educate the team on the reasons and also show them the results.
Now the topic of setting behaviour is even more important in current circumstances. We have bankers who are incentivized by governments through bailouts (stimulus package, or whatever else you want to call it) to run their companies better than they did in the past? So we suddenly expect these same people involved in the mess, with a few more billion dollars pumped into the system to do a better job?
We expect the same employees at auto giants to get a few billion dollars to suddenly do a better job of running an auto company?
I have strayed over a range of issues to drive the point that often even experienced managers believe that rewards result in lasting changes to ones behaviour. The reality though, is that long termbehavioural changes result only if individuals in organizations can be educated about the need for change and can be convinced that it results in a tangible good. The other way of course is to hand out harsh punishments or large fines continually to make fear set behavioural change – Just kidding!!
Last week I was talking to a politician from a neighbouring country about corruption. He is from a South East Asian country that is known to have rampant corruption. He knew I lived in Singapore and he turns around and tells me "each country has a way of making people pay – in some it is through bribes and in some it is through high wages of the civil servant, but the end result is that we all pay for what we get". there is truth in this but I would rather have the civil servants paid well instead of having than them paid low and normal citizens having to individually compensate them for services.