Money Is Not Always the Best Incentive

We recently blogged about the abysmal rates of successful change initiatives in organizations (70 percent fail!), and mentioned that one reason is unwritten rules that discourage change. Another reason is that change programs are often linked to an incentive that actually doesn’t incentivize very well: Money.

In “The Inconvenient Truth About Change Management”, (http://bit.ly/1woQGIJ). McKinsey & Co.’s Scott Keller and Carolyn Aiken note that while many leaders attempt to link change programs to employee compensation, this type of motivation can be expensive, impractical, and not all that effective. More effective by far are small, unexpected rewards. For example, Gordon M. Bethune, who turned around Continental Airlines, sent a surprise $65 check to every employee when the airline made it to the top 5 for on-time flights. John McFarlane of ANZ Bank sent a bottle of champagne to every employee for Christmas with a card thanking them for their work on the company’s “Perform, Grow and Breakout” change program.

Why are small, unanticipated rewards more effective? Because employees perceive them as a “social exchange” versus a “market exchange.” A social exchange has the feel of a personal “thank you”—like bringing a bottle of wine to your dinner hosts, as opposed to a business transaction—like asking for the bill in a restaurant. In short, as we have long said, unanticipated rewards are invaluable because people work best when they feel personally recognized and appreciated!

Please share your experience. What was the last time you got an unexpected reward at work? How did it make you feel and how did it impact your performance?  Join the conversation and click "comments" on our Community of Practice Forum.

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