The current (February, 2012) issue of the Journal of Economic Psychology features a terrific article by an assemblage of behavioral psychologists, “Influencing behavior: The mindspace way.” Among the many interesting, insightful takeaways, the authors define nine key behavioral drivers. In the article, they use the mnemonic “mindspace” to unveil each specific characteristic.
The nine factors center on the following critical points:
- Who communicates information to us may be more impactful than what is communicated;
- How we respond to incentives is often based on predictable mental shortcuts, one of the strongest desires is to avoid loss (even greater than realizing a potential gain);
- What other people do is a major determinant in what we decide to do;
- We have pre-set default positions that we readily defer to;
- When facing multiple stimuli, we will give our attention to the novel and the most individually relevant;
- We are highly susceptible to sub-conscious cues, which “prime” our decision-making and mindset outside of our conscious awareness;
- Emotions and how we associate emotionally is perhaps the most powerful determinant of action;
- We have a natural desire to behave in a manner consistent with commitments that we make, with a high value on reciprocation;
- What we do is generally guided by that which will make us feel better about ourselves
Any of the bullet points above can launch a lengthy discussion, evidenced by books such as Nudge (Richard Thaler and Cass Sunstein), Drive (Dan Pink), Predictably Irrational (Dan Ariely), and Sway (Ori and Ram Brafman).
One question that many have is: While this is great information, what do I do with it? Even if I am willing to concede that people are irrational, that the human condition is generally predisposed to certain modes of behavior, how can I leverage this to achieve my own goals?
The answer is that utilizing this type of research can spell the difference between success and failure for your brand, your product, or your company. Many widely held beliefs simply do not hold up under the scrutiny of research, and having some grounding in the area of decision sciences can help give you a tremendous leg up on the competition.
Example: Often it is assumed that people seek to maximize economic benefit above any other alternative. Included in this is the notion that the best way to incent behavior change is to offer people more money, or to provide them things like debit cards or retail gift cards in return for higher performance on the job. As you have read here on numerous prior occasions, it doesn’t work that way. Using money (or any type of award which is denominated in dollars) may, for a host of reasons all of which are grounded in behavioral reseach, actually work against you.
On the other hand, allowing an individual to commit to his/her own level of performance increase, and creating an environment where elevated productivity becomes the norm, where key performance indicators are readily available to show gain, and the reward is something that is salient to the individual, will have the greatest positive impact.
One exceptional point the authors make has to do with the degree that people will go to avoid realizing a loss. In fact, research shows that loss aversion is a more significant behavioral driver than the potential for personal gain. It made me wonder if an incentive program might not be structured to improve sales performance by offering a means of avoiding loss, rather than targeting a personal gain.
Example: Let’s use a sales awards program, where individuals are rewarded for growing their revenue above a historical level. Let’s say it is a four-month long promotion, where each sales person is challenged to improve on their sales performance of the same period last year. Traditionally, the sales rep might be given a goal and over the course of the four months, would earn rewards commensurate with how well s/he performs. But what if, instead, the company went ahead and gave every sales person (up-front, at the start of the promotion period) an level of award earnings equal to what the average high-performing sales rep might be expected to earn during the four month qualifying period. Then, each month that the sales rep failed to perform, s/he would have their awards balance reduced (i.e., they would lose the awards value by underperforming, instead of being rewarded with a gain for over performing). At the end of the promotion period, every rep that failed to achieve his/her sales target would have lost all of their awards. Those who attained their goal would get to keep (and spend) their rewards. The ones who over-achieved during the promotion would receive a bonus payout in rewards. I bet that would have a pretty potent effect on sales. Never seen it done, though. Would love to try it out and see what happens.
One thing is certain: people will do what they want to do, not always what you think they will do. The more you understand about how we make decisions that guide our behavior, the better off you will be to put it to positive use.
Source: Journal of Economic Psychology, Volume 33, Issue 1, pp 264-277; Influencing behaviour: The mindspace way; P.Dolan, M. Hallsworth, D. Halpern, D. King, R. Metcalf, I. Vlaev (www.elsevier.com/locate/joep)
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Well said, Rick. Our behaviors and the psychology that drives them fit into the “it is what it is” part of our world. Knowing what they are gives us at least a fighting chance to improve on our current results.
Thank, Tim, as always. I always chuckle when I hear a sales leader or marketing executive comment, “our people aren’t like that…”. I’m sorry. Last I checked people are like people. We can’t help it. We are what we are, and we really don’t realize that what we say and do are often very far apart. Keep sharing the truth about human nature, and maybe we all will be better off.
Once upon a time, a line that I represented offered a version of your example: all sales reps were shipped a state-of-the-art projection TV (now you can tell how long ago this was); the goal was to sell 50 Projection TV’s during the promotion timeframe. At the end of the program, we would be invoiced $100 for each TV that we fell short of the target. As I recall, I worked like crazy to sell those TV’s – the net effect was that I ended up with a big screen TV for $200 – still a good deal. (But I don’t think it could be called an “incentive” program – more like a risk-avoidance scenario, that came with a fair amount of stress as a $5000 invoice was not in my budget at the time).
Even a perfectly-designed incentive program is not a panacea if the corporate culture is off. Two recent stories: the teller at a major bank noticed the name of my company and proceeded to tell me about their incentive program, “oh, we have one of those but I don’t really get it. It changes every few months, we get a big scorecard every day in our e-mail but I don’t really understand why I’m earning points or what I should be doing. I just continue to do my job and if something happens, great.” This is probably not what the bank executives or incentive planners had in mind when they rolled out the program.
Likewise a friend at a major communications company says they they used to have employee “satisfaction” surveys – now everything is “engagement”. He also said, “it’s not like we don’t know which answer we’re supposed to pick”. He followed that up with a tale of past incentive trips to exotic locations – this year they were each awarded a crystal vase (he made a face when he said it). Lots of factors are in play that are common to many companies today: downsizing means more work for fewer people; he used to be in a big office with all of his direct reports and recalls that they used to feel like a team – they are now all working from remote offices with conference calls (during which everyone is multi-tasking) as their only interaction. He feels very dissatisfied AND disengaged – but that will never show up on their survey.
It’s my business, so I’m definitely not hating on incentive programs or benchmarking surveys – but I would argue that you don’t need a survey to tell how your employees feel. Sit on a plane and listen to flight attendants complain to each other about schedules; get in line at the grocery store and listen to the cashiers complain about hours and baggers over the customers – there are a lot of unhappy employees out there. In fact, when I come across someone that seems really happy about their job or their company, it’s remarkable. Managers need to start with some basic common sense: give your people some autonomy without undermining, reinforce that they’re making a valuable contribution, understand that they have a life outside of work, support them in efforts to grow or learn new skills – be a decent human being. THEN you’ll get better results from your incentive program.
Thank you, Barb, for coming to Ideationz, and for your comments. I agree that an incentive used to mask other shortcomings will almost always fail or fall short. Especially in an environment of disconnected or misaligned leadership, or where there are fundamental flaws in the compensation system. Employee satisfaction surveys can be instrumental in identifying issues and degrees or priorities. Too often they are set aside and not acted upon, however.
Engagement is different than satisfaction, although some will confuse the two. A highly satisfied employee my still leave the company if s/he feels that there are better opportunities elsewhere. A highly engaged employee may feel challenged and want to stay, without being satisfied with how things are.
Thanks again, Barb. I hope you come back often and share your thoughts!
Rick, Great article! You are correct that utilizing this type of research can spell the difference between success and failure for your brand, your product, or your company. At Xactly, we believe in empowering companies so they can offer accurate sales incentive compensation that focuses on market changes and corporate goals without hiring expensive professional services teams. Tips here: http://www.xactlycorp.com/media/2011/12/incentive-compensation-for-yourself/