The Positive Effect of Negative Incentives

Key Concept

The question of whether positive or negative incentives work better has long been a matter of debate in society. Children were thought to responded better when they were spanked for bad behavior than if they were rewarded for good behavior. Evangelists preached fire and brimstone rather than eternal life to keep their flocks compliant to the word of god.

In the Workplace

The choices are less stark in the workplace, however there is still disagreement over the impact of positive and negative incentives to motivate the right work behaviors. Indeed just as our views on spanking children has changed, firms rarely use negative incentives. There is a strong belief system with managers that people will not respond to negative incentives. Research however, shows that negative incentives; incentives that require individuals to perform in order to avoid a loss, are more motivating than positive incentives, which motivate individuals through a gain. A good example is the case of outsourcing in the early 2000’s. Work productivity inside the organization increased during the market testing phase of an outsourcing opportunity.  It fell off when the decision was made as people faced uncertainty and actual job losses.

The Positive, of a Negative Approach

The first thing that needs to happen is for managers to reset their thinking, their unconscious biases that negative incentives won’t motivate their team members. Managers could begin designing some incentive programs that might seem counter intuitive, however they could lead to higher performance.

We already accept that there is no one-size-fits-all motivation programs and that many varieties of motivation should be utilized. This might be cash and non cash rewards. We also know that different demographics are motivated by different incentives.

A Workplace Example

While many managers shy away from removing cash from a person or removing their entitlements, some firms are applying negative incentives. Law firms allocate bonuses as part of annual salaries for example. Bonuses are lost if they do not meet a certain number of billable hours.  These days we are also seeing some companies stipulate that health care coverage will be reduced if employees do not take certain health improvement steps.

A positive spin on a negative example might be showing employee non-performance in specific areas on a leaderboard. Lets say a company is having difficulty getting adoption of accurate data updates on client activities. They might run a leaderboard where the person with the most incomplete data fields is at the top and the person with the least is at the bottom. This way as the employee completes these tasks not yet done there is a countdown to zero. The aim being for all employees to have a clean space on the leaderboard. The hero is the person with zero incomplete tasks.

Conclusion

Despite our natural bias against negative incentives, managers should consider all incentive options. This way they keep things fresh with their team, encourage good behaviors with a carrot and a stick. Spinify can help you with positive and negative leaderboards to engage and motivate your staff to focus on the metrics that matter.

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