If the incentives are so powerful, why do they sometimes fail?
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Is motivation so important?Are incentives important in the management and operation of a business? The answer is very important.The role of incentive is not only reflected in the internal management of the enterprise, but also the shaping of the external image of the enterprise.For example, when a company wants to change its pricing strategy or is facing a new product launch, how do you communicate that change to the public?In the case of Coca-Cola CEO Douglas Ivest, in 1999, he was interviewed by a Brazilian newspaper to discuss an incentive scheme.The idea involved a new technology for automatic temperature measurement in vending machines, and Iveste thoughtfully said that we could use this technology to allow vending machines to price goods.When the weather is hot, people want to buy Coca-Cola more, and he believes that the price of Coca-Cola should be raised when the temperature rises.This is the basic principle of economics: prices rise as demand increases. Coca-Cola usually sells for $5, and on hot days, vending machines react to the temperature and raise the price to $0.0.Similar dynamic pricing is not uncommon in many industries, such as airlines and hotels. However, as soon as the news of temperature-controlled pricing came out, customers were unhappy. The media added fuel to the fire, calling Ivest's pricing plan a "cold-blooded strategy to capitalize on the needs of loyal customers."Coca-Cola failed to make a good story. Ivest's mistake was to leave the story too much room for free interpretation. He should not only discuss the technical aspects of the idea, but also design the story smartly.For example, you can set the price of soda to $1.0 on weekdays and $0 when it's cold. It's hard to imagine a backlash to rewarding customers with discounts on cold days.These two approaches, based on the same economic principles but with different incentives, have completely different results.Coca-Cola's mistake shows us how motivation and its signals can take control of the story in the process. When properly designed, incentives can help us respond effectively to these changes and create a good external image.02
Mixed Signal: Why Incentives Don't Work?If the incentives are so powerful, why do they sometimes fail?Because many excitations deliver confusing mixed signals.What is Mixed Signal? Imagine a CEO telling employees, teamcooperateCrucial, but the incentives he designed for success were based on individual work.The result is clear: employees ignore the CEO's words and strive to maximize their personal success and monetary gains, because they read the signal from the motivation that doing their job well is all that matters.In other words, what you say and what you do send a different signal, and we call this phenomenon mixed signals.The presence of mixed signals is an important reason why the excitation does not work. Examples of mixed signals include: Encouraging Teamscooperate, but motivates individuals to succeed; Encourage long-term goals but incentivize short-term results; Encourage innovation and risk-taking, but punish failure; Emphasizing the importance of quality, but paying by quantity.Professor Yuri Gnitz gives an example from his own experience in Mixed Signals. As his son Ron grew up, he would tell Ron that "good people can't lie, and honesty is the difference between good people and bad people".At one point, he took Ron to Disneyland. When you stand in line to buy tickets, the sign reads: "Under 3: Free." 0 years and older: $0. When it was their turn to pay, the conductor asked how old Ron was, and he said, "Almost 0." "But a few months ago, Ron had just passed his 0th birthday.After entering Disneyland, they had a lot of fun at first. But half an hour later, Ron said, "Dad, I don't understand. You tell me that bad people lie, but you just lied! Ron received two contradictory signals from Professor Gnitz that what he said and what he did (in order to escape the $117 ticket) was not the same.This is where mixed signals come in: you say one thing, but you do another in front of incentives. Then, when they arrived at the next ride, a sign on the door read, "Only ages 4 and up are allowed to play," at which point Ron said, "I just turned 0!" ”。 It was clear that in what his father said and did, Ron had made a choice.Here's why incentives don't work:Many times, there is often a conflict between what people say and what motivates them.You can claim to everyone that you value the quality of honesty, but it's no use just talking. In order to keep up with the talk, you need to take costly actions to back it up.If what you say is consistent with the incentives offered, the signal is credible and easy to understand; Conversely, the signal is contradictory, and the incentive can easily fail.03
How can I avoid mixed signals and achieve effective excitation?So, how should we avoid the generation of mixed signals in work and life?The mixed-signal problem can be transformed into a simple question: What should be rewarded?In many cases, there are many factors involved in performance, but rewards are for only one of them, and are often the one that is most measurable.So a "one-size-fits-all" approach often sends a clear message to employees: focus on the metrics that will reward you monetarily and ignore everything else.Importantly, incentives can affect the contradictory relationship between different goals, and when using it to reward an action or outcome, you need to understand and control how the incentive is impacted, otherwise you may send conflicting messages.Therefore, the key to avoiding mixed signals is to confirm that the metric you are motivating is exactly what you want to contribute. Because motivating people to increase the output of one dimension can have an unintended effect on other dimensions.For example, why do drivers all over the world take all sorts of measures to avoid traffic jams, but only bus drivers never take shortcuts?This is most likely because there is not much correlation between the speed of the buses and their compensation. In the absence of incentives, bus drivers have no incentive to look for that fastest route, and they are paid by the hour. Once the car arrives at the terminal, simply turn around and continue driving until the end of the shift.A study in 2015 showed that Chilean bus drivers were keenly aware of incentives and reacted quickly to changes in incentive structures.If they are also paid an hourly rate like American bus drivers, they have no incentive to find the fastest route. In our terminology, they get a signal that is, "It's not a big deal to delay passengers." ”But Chile changed the incentive structure so that drivers were paid based on the number of passengers on the shift, and they received the signal that "management is focused on ridership." ”Driver behavior can change dramatically. The new incentive structure pushes drivers to reduce delays, and they will look for time-saving routes just like you and me, and they will drive longer and have fewer breaks.From this case, we can see that when making decisions about the driver's compensation package, should you choose efficiency or safety and comfort? A lot depends on the fact that companies need to determine what they want to do first. Once identified, incentives can be selected that align with the driver's goals and avoid passing on mixed signals.secondlyAn important rule for incentive designers is to understand who is paying for the product and who is rewarding, and remember that they may not be the same person.For example, imagine you're flying from Beijing to Guangzhou for a friend's birthday party. Suppose Air China's one-way ticket is 700 yuan, and China Eastern's one-way ticket is 0 yuan, which one would you choose? Most likely, you will choose China Eastern Airlines.What if you take a plane not to a party, but to Guangzhou for a business trip, and the ticket is paid for by the company? Because you often fly Air China planes and have its points, then you are more likely to choose Air China planes. After all, the company pays for the ticket, and you get mileage credit.Today, all major airlines have frequent flyer incentive programs. For every 1 km flown or a certain amount spent, customers earn points that can be redeemed for air travel, upgrades, or various other benefits at a later date.These schemes motivate us to stay loyal by increasing the cost of switching. But what makes it unique is that in many cases, it's not the person who pays for the flight and the loyalty program.Therefore, when designing incentives, it is important to have a clear understanding of who our incentives are acting on.