Exploring the origins, ethics and future of changemaking

Pay it forward – searching for a more ethical incentive

In Ethics on July 12, 2012 at 10:16 am

In the business world it is a fairly common tactic to use bonuses, commissions and other rewards to incentivise performance and retention amongst employees. Is it possible to create a more powerful incentive however, where the employee who does the work receives nothing personally? In addition, could it be possible to create an incentive where the individual receives nothing, but generates good will amongst others?

A few years ago I worked with the business development team at a well known Australian charity. It was at an important stage in the organisation’s growth. They had a proven product and a good understanding of their market. The challenge was simply one of increasing volume, filling up business in quiet periods and making the whole operation more profitable. Sounds simple doesn’t it.

The organisation was highly effective at retaining existing clients, with over 75% having been with them for over 15 years. Each year there was a small attrition of clients, and a modest acquisition of new clients. To meet the organisations growth, profitability and sustainability targets, new sales needed to ramp up significantly. The team had participated in training, implemented new sales tracking tools and managed its contacts more closely. The organisation also invested in innovating new programs and services to take to market. Aside from the new style programs, none of these made a significant difference to increasing sales.

The Executive Team considered whether the organisation needed to implement an incentive scheme for its sales staff. Prior to this, business development staff were salaried and conducted sales alongside client management. There were no specialist sales people in this team – each person had a client management and a sales function. Over a two year period, the CEO proposed to the team that a bonus and commission system be implemented. Each time the proposal was rejected by staff. They stated that their motivation for working for the organisation and serving their clients was not out of money, but out of a genuine desire to see the mission fulfilled.

After two years, an incentive system was implemented anyway. Staff would receive an annual bonus for making budget, and an additional percentage commission on any new clients they brought on. It was fascinating to see what happened to the team culture almost immediately. Where the team was previously highly collaborative, they were now more keen to pick up the new prospect and keep that to themselves. Some healthy competition was good of course, and led to increased motivation for some.

What started to appear however were some really strong problems. One of the problems with the operational model was that the organisation was already beyond capacity at certain times of the year. The organisation needed new clients, but could only accommodate them in the quiet times. It seemed that every prospect that came into the sales cycle wanted the busy times. What ended up happening was that the sales staff made the sale, loaded up the operational team with a workload that would almost break them, and then the sales staff got the commission. This is on top of the sales team already earning more than the operational team.

When word got out that the sales team were earning commissions, it was perceived that they were being rewarded for burdening the staff in the operational team. The organisation now had an ethical dilemma on its hands – what is the fair way to reward and treat staff as a way of respecting their various contributions?

The solution came from neither Management nor Human Resources. It came from the Sales Team itself. The sales staff got together to creatively rethink its incentive system – not the management, but the people who were to receive the bonuses. They put forward a proposal whereby the Sales Team and Operational Management Team had to work together to determine how any new business would be accommodated. Any rewards earned through new business would not be paid to the sales team, but rather to the operational team as an end-of-year gift. This recognised that it was the delivery staff that actually bore the brunt of the these decisions.

This was a remarkable cultural act in itself. Further to the cultural success, what ended up occurring was that the operational team were more open to collaborating to see new business find a place in the operational calendar. The two teams worked creatively to find a way to make it work.

This is an example in behavioural ethics of something called ‘bounded awareness’. According to Bazerman and Tenbrunsel in Blind Spots, “bounded awareness refers to the common tendency to exclude important and relevant information from our decisions by place arbitrary and dysfunctional bounds around our definition of a problem”. The problem was initially defined as purely and simply a ‘sales problem’, which led a simplistic ‘incentive solution’. The initial incentive created a blind spot to the more complex dynamic that was happening in the organisation around operational flows, interdepartmental management, client needs, impacts on delivery staff and the cultural values of the organisation. A simple incentive blinded the staff to seeing that complexity and what was actually needed.

While the new incentive did not necessarily achieve the significant increase in sales that the organisation was seeking, it did allow the organisation to see and understand itself more effectively. It managed to understand client needs, test the limits of its operational model, push the creative and ethical skills of its staff, build more healthy workplace relationships and bring its multiple stakeholders together around this complex problem.

Incentives can be powerful, and have far greater ethical impacts than we perhaps give credit it. Rethinking incentives in this case opened hearts and minds, and led to a more ethical outcome for all concerned.

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