You Get What You Incentivize (For Better or Worse)

In the complex landscape of business today, it is widely acknowledged that goals/incentives play a pivotal role in driving behavior and achieving desired outcomes. Organizational leaders and managers are constantly seeking ways to align the interests of their employees with organizational goals, hoping to create a motivated workforce that consistently delivers exceptional results. However, to truly understand how 'we get what we incentivize' requires us to develop an awareness of the intricacies at play, as well as common pitfalls to avoid. In this post, we will explore the relationship between goals/incentives and larger organizational behavior while discussing some key pitfalls to keep in mind.

There is Power in Setting Goals/Providing Incentives

Goals and Incentives, in their various forms, have the ability to shape behavior at both the individual and collective higher levels within an organization. By setting expectations of how we want our employees to act and providing rewards, our organization can foster a culture of motivation, productivity, and achievement. We (as leaders) develop goals that align with the organization's objectives, communicate them to our employees, along with some form of positive reinforcement. Whether it's financial bonuses, recognition, career advancements, or other tangible benefits, these incentives should inspire employees to go the extra mile and consistently exceed expectations. (At least in theory…)

Align Employee Goals with Organizational Objectives

To build on what we just said, effective and efficient incentive programs are designed with a clear understanding of the organization's strategic objectives. The strategic objectives are flowed out and used to form the basis of goals down at the manager/employee level. We (as managers/leaders) are responsible for connecting the organizational objectives with our team members’ goals. When incentives are aligned with/tied to these goals, employees are much more likely to direct their efforts towards the areas that drive success for that team. For example, a sales team might be incentivized based on revenue generation, while a customer service team could be rewarded for customer satisfaction metrics. By aligning incentives with specific and measurable performance indicators, organizations can channel their employees' efforts towards desired outcomes. (That’s how it should work, anyways…)

Beware the Unintended Consequences

While goals/incentives are a powerful tool, they can (and often are, sadly) misused. By not anchoring individual goals to specific and measurable metrics, we risk evaluating employees against moving goalposts or subjective feelings. The net effect is demoralizing our employees and destroying their trust/faith in us and the organization. Even when not deliberately misused, poorly thought-out goals/incentives can produce unintended consequences that we must be aware of and guard against. One such unintended pitfall would be the potential for incentivizing short-term gains at the expense of long-term sustainability. For instance, if sales representatives are solely rewarded based on the number of deals closed, they may prioritize closing deals quickly rather than focusing on building lasting customer relationships. Another potential pitfall we need to be on the lookout for is "gaming" of goals/incentives. Even when goals/incentives are tied to specific metrics, people may find ways to manipulate the system to achieve the desired outcomes without genuinely contributing to the organization's overall success. This can lead to unethical behavior or actions that undermine the organization's values and long-term growth. (There are a lot more, unfortunately!)

The Importance of Measurement and Evaluation

To ensure that we are driving the right behaviors with goals/incentives, we must establish robust measurement and evaluation mechanisms within our organization. Regularly assessing the impact of incentives helps identify any unintended consequences and allows for course correction if needed. By gathering feedback from employees and closely monitoring the outcomes of incentivized behavior, organizations can make informed decisions and fine-tune their incentive programs to achieve optimal results. To put it plainly, we need to look at the results and compare them to what we thought we were incentivizing to see if they match. If they do not, we need to adjust the goals/incentives we are using.

How We Create a Balanced Goal/Incentive System

Designing an effective goal/incentive system requires striking a delicate balance. It involves careful consideration of various factors such as organizational values, employee engagement, fairness, and sustainability. An inclusive approach that involves input from employees at different levels can help ensure that the goal/incentive system is perceived as equitable and motivational by our teams. Additionally, it is important to regularly review and update incentive programs to adapt to evolving organizational needs and external market conditions. This flexibility enables organizations to stay agile and responsive, ensuring that incentives continue to align with strategic objectives.

Wrapping It Up

We get what we incentivize! Our organizations can be helped or hurt by how good of a job we (as leaders) do, because goals/incentives shape employee behavior and drive outcomes. However, we must be cognizant of the potential pitfalls that come along with setting goals/incentives. Balancing short-term gains with long-term sustainability, mitigating unintended consequences, and establishing effective measurement and evaluation processes are essential for creating a successful system. By navigating these challenges and building goals/incentives that align with our organizational goals while fostering employee motivation and engagement, we can set our organizations up for sustainable growth and success in today's challenging and evolving landscape.

Make Your #1 Goal to Create a Balanced Goal/Incentive System! Good Luck!