It is one of those business myths, which take too long to get out of executive’s mind: the higher the reward bonus, the better the business results of your key contributors. Social science clearly told us over the last decades, that those external motivators “if you do that, you get this” might work in a very narrowly defined set of tasks and tend to focus people even more on desired outcomes already in mind, rather to use creativity to come up with new solutions.
social science shows: classical bonus systems, focused on extrinsic motivators, are harming cognitive and creative business outcomes – a seductive poison for companies facing Transformation.
Still, we find those bonus incentive systems all over the place, particularly in incumbent businesses. Businesses of the 20th century. They offer a seductive poison by promissing a simple equation for better business results. At the same time, they make your company blind for what is left or right and will make you a simple target for “Disruptors”. Learn from “Start-ups” or “Disruptors”, which are addressing incentives differently. They focus on motivators we call “intrinsic” – motivators of the 21st century. Here is why.
New generations (“Y”, “Z”) coming to business and finding eventually their ways to leading positions in corporations of all industries. They carry with them a new set of motivators they are looking for. One of them being “Purpose”. Increasingly those new key contributors are looking to work for companies with a purpose to add a deeper meaning to what they do other than just financial success. They are seeking identification with the company, the task, they team.
Same time, modern business transformation (or innovation as such) might well be (or should be) initiated from the top, but largely builds on autonomous teams, which are not bound to organizational blockers or silos. A good mix of cross functional teams with different mental profiles like risk takers, pioneers and operational experts allow a significant faster speed in business innovation.
Incentive systems of the 21st century reward AUTONOMY, MASTERY and PURPOSE while bonus systems of the 20th century drive your company to do more of the same kind and leave you blind for disruption and unable to transform.
Leading a portfolio of such cross functional teams also changes the profile of a “manager” in the 21st century. No longer can a manager be the expert, but he rather redefines its role as the “coach” of experts, of employees which are “masters” in their subject areas or skills.
An incentive system of the 21st century therefore must be able to give options to address those crucial motivators for modern, agile business innovation teams: Autonomy, Mastery and Purpose. Allowing classical bonus systems to rule your company will narrow the scope how people look at problems or opportunities. As a result, your company will continue to do more of the same kind, will be increasingly blind for what is happening around you and leave you unable to adapt with agility.
“Transformational incentive systems are built into your company vision, mission and culture.”
Modern incentive systems therefore are not just “a way to pay people based on performance”, but are built into your company vision, mission and culture. It all starts with your open mindset, your focus on talent and building an agile organization. It masters with inspiring your people and giving them a purpose. Every day.