Talent & Growth presented by The Animo Group
How to send the right signals to your people with incentives with Uri Gneezy, Professor of Economics and Strategy and the Epstein/Atkinson Chair in Behavioral Economics, Author of Mixed Signals
Tue Jun 27 2023Description
The episode explores the importance of designing effective incentives and the potential pitfalls of sending mixed messages. It discusses the need to balance individual achievement with team goals and the challenges of creating a culture that encourages innovation. The episode also emphasizes the importance of testing and adjusting incentives for optimal results and identifies strategies for identifying motivated workers and encouraging behavior change.
Insights
Incentives should align with desired outcomes
Designing incentives without considering the desired signal can lead to unexpected results.
Balancing individual achievement and team goals is crucial
Creating a culture that balances individual achievement with team goals is challenging but possible.
Anticipated regret can be used as an incentive
Anticipated regret can be used as an incentive to motivate people, but ethical considerations should be taken into account.
Testing and adjusting incentives is necessary
A/B testing is crucial to understand how people react to incentives and if they can game the system. Start with small-scale testing before implementing incentives on a larger scale.
Identifying motivated workers is important
The pay-to-quit strategy helps identify employees who genuinely enjoy their work. Offering a financial incentive for employees to quit can help separate motivated workers from those who are just there for the paycheck.
Chapters
- The Importance of Designing Effective Incentives
- Balancing Individual Achievement and Team Goals
- Finding the Right Balance in Incentive Design
- Testing and Adjusting Incentives for Optimal Results
- Identifying Motivated Workers and Encouraging Behavior Change
The Importance of Designing Effective Incentives
00:02 - 13:56
- Incentives are defined as something that would make you take an action you wouldn't otherwise.
- Businesses need to be careful not to send out mixed messages with their incentives.
- Designing incentives requires understanding how they send signals and adjusting accordingly.
- Incentives send signals and companies need to ensure they align with desired outcomes.
- Designing incentives without considering the desired signal can lead to unexpected results.
- Mismatched incentives can lead to compromised quality and customer dissatisfaction.
Balancing Individual Achievement and Team Goals
13:29 - 26:59
- Creating a culture of inclusivity and psychological safety allows for innovation and encourages people to speak up and take risks.
- Being creative increases the variance of outcomes, leading to both bad and great podcasts.
- Punishing failure discourages creativity.
- Understanding why failure occurred and learning from it is more productive than punishment.
- Incentives in society often prioritize short-term success over long-term goals.
- Creating a culture that balances individual achievement with team goals is challenging but possible.
Finding the Right Balance in Incentive Design
19:57 - 33:35
- Incentives in soccer can lead to individualistic behavior instead of teamwork.
- Companies need to find a balance between individual performance and team performance incentives.
- Having a common sense person who can evaluate incentive schemes is crucial.
- Anticipated regret can be used as an incentive to motivate people.
- The zip code lottery is an example of using anticipated regret as an incentive, but it may not be ethical.
- Incentives should not be the only consideration, especially when it comes to essential services like healthcare for children.
Testing and Adjusting Incentives for Optimal Results
33:09 - 39:44
- Understanding social signals is the first step in designing effective incentives.
- Incentives can dilute social signals and affect self-signaling.
- A/B testing is crucial to understand how people react to incentives and if they can game the system.
- Start with small-scale testing before implementing incentives on a larger scale.
- Don't assume you know everything about incentives; test and adjust as needed.
- People are skilled at gaming incentives, so be cautious when designing them.
Identifying Motivated Workers and Encouraging Behavior Change
39:16 - 46:05
- The pay-to-quit strategy helps identify employees who genuinely enjoy their work.
- Offering a financial incentive for employees to quit can help separate motivated workers from those who are just there for the paycheck.
- By allowing employees to choose whether to stay or leave, you avoid negative consequences like sabotage or badmouthing.
- Employees who choose to stay after being offered an incentive have a stronger commitment to their work.
- Habits are difficult to change, but one-time incentives can be effective in motivating behavior change.
- Educators aim to make learning enjoyable, which is challenging with incentives.