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Recent papers that I’ve studied are about Behavioral Change Theories (BCT). As an earlier update showed managing on behavior is more effective than managing on outcome my question was about the effect incentives on behavioral change. Do incentives have an effect on behavioral change?

The answer to this is yes and no.

To answer this question, I’ve studied 8 papers on this subject.

6 were meta-analyses on the effects of incentives on behavior within healthcare (stop smoking, healthier living etc.) Items where the value for people probably could/should be higher that for work. Even though behavior does not show this.

2 other papers were about effective methods of changing behavior.

  • Do incentives have effect on changing behavior. Yes

As long as there is an incentive, behavior will change. The longest periods measured where 18 months.

  • Do incentives have an ongoing effect on behavior when they stop? No/hardly

For an initial period (2-3 months) the behavior did not fall back to the original level. The few papers that followed up after 18 months found that the incentives did not have long lasting effect.

Probably this is related to research by behavioral economists as Kahneman and Ariely who have proven many times that people value short term effects over long term effects.

On a sales management note:

When you choose to use incentives to influence behavior, it is wise to leave the incentive in place for as long as you want the behavior. Maybe only using it for short term actions. Or use it as an easy way to implement/ kickstart for change, then follow up by other change methods, such as the top Behavioral Change Theories

To change behavior for a longer time, other methods are better.

Effective ways to change behavior seem to be

  1. Repetition and substitution,
  2. Goals and planning (goal setting was also a way to achieve higher results even without variable pay)
  3. Covert learning; meaning unaware ways of learning such as stories and nudging
  4. Self-belief,
  5. Scheduled consequences,
  6. Antecedents; meaning changing of environment, surroundings etc.

Interestingly incentives do not rank high. Reward and threat is 9th, out of 34 ways in changing behavior. And the group “reward” consists of positive reinforcements of which monetary enforcement can be one, as can be compliments or other items.

Setting the right KPI’s and monitoring them is important, the table below is from a paper by Kerr in 1995 and still true and please also remind the note / dilemma by Kees Cools

  1. Impact (can the employee do something about it, do they have influence)
  2. Goal achievement (do the goals of the target directly contribute to the goals of the company)

The dilemma being that

  • Clear and simple KPI’s: individual impact is high, but company goal achievement is low
    • Number of appointments
    • Keeping FTE budget
    • Max marketing spend per lead
    • etc
  • Complex KPI’s: individual impact is low but company goal achievement is high
    • Company profitability
    • Share value
    • Customer happiness
    • etc
We hope for But we often reward
Long-term growth; environmental responsibility Quarterly earnings
Teamwork Individual effort
Setting challenging “stretch” objectives Achieving goals; “making the numbers”
Commitment to total quality Shipping on schedule, even with defects
Candor; surfacing bad news early Reporting good news, whether it’s true or not; agreeing with the boss, whether or not (s)he’s right

Again, please feel free to share this content with others. And share the research, the more companies that will join, the stronger the answer will be. I’ve just shared this article on LinkedIn; https://www.linkedin.com/pulse/context-around-variable-pay-mark-verhoeven A like or a share is welcome.

The LinkedIn group where you can interact is https://www.linkedin.com/groups/13929507/ I have invited you to join.