Incentivizing Performance

You have developed an agenda for change. But now it’s time to put the plan into practice. You’ve engaged your team in discussion about strategies to encourage change and enhance individual performance. Many argue you need to tie performance to compensation, while others state the key to performance is punishment and singling out poor performers. How do you effectively incentivize performance for individuals and how will your strategy affect the culture of the department?

A common approach to incentivizing performance is to pay individuals who change, or punish individuals who fail to do so. On the question of employing the carrot versus the stick, it has generally been shown that individuals respond better to positive reinforcement, and perhaps even more importantly, change is more likely to be sustained in response to positive, rather than negative, reinforcement.

On the issue of paying people, pay-for-performance clearly works for piece-work such as planting trees. However, for cognitively-based tasks, that applies to much of clinical activity, financial incentives may actually serve to reduce productivity.  In addition, there are several problems with pay-for-performance in a clinical context. First, financial incentives must be large to effect behaviour. Second, no system of pay-for-performance perfectly matches the compensation to the desired activities, and as such, an imbalance of incentives may lead to undesired mix of activities. Third, some individuals will inevitably spend their time “gaming” the system to maximize financial pay out. Fourth, individuals stop doing what isn’t financially incentivized and unless the financial compensation scheme covers all activities, overall productivity may actually decline. Fifth, in a system based on financial incentives, every new activity requires a new financial incentive. Sixth, at some point, pay-for-performance becomes “base pay” and loses its incentive value. Finally, humans are driven by inspiration, autonomy, and mastery. Most clinicians are driven to action by the opportunity to make a positive change in quality of care. While change may be faster with financial incentives, an inspirational and worthwhile mission is more likely to lead to sustained and positive change (see my previous post on Vision/Mission here).

So, if financial incentives are not the answer to influencing behaviour, what is? Trust and goodwill are keys to effective leadership. Trust leads to influence and positive working relationships. Establishing positive working relationships requires understanding individuals and their values. One important aspect of understanding people is to understand that different people see the world differently. Importantly, it is likely that some, or even many, people see the world differently than you do. From the individual’s perspective, their perceptions of the world and why they act the way they do, make perfect sense to them. As humans, we are frightfully poor at seeing the world from other individuals’ perspectives. When confronted with behaviour we don’t understand, the natural indication is to attribute that behaviour to the integrity or intelligence of the individual. The solution to the dilemma of behaviour that “doesn’t make sense” is to constantly ask why. With a deep drive to understand why people act the way they do, leaders can uncover values and motivations that will, in turn, allow the leader to appeal to, and influence, that person.

In summary, while punishment and pay-for-performance are popular strategies to incentivize individuals, effective and sustainable charge is more likely to come from inspiration. This step requires significant efforts to understand people that may be helped by constantly asking why.

5 thoughts on “Incentivizing Performance

  1. James Wright says:

    Absolutely right. Every individual can be motivated in different ways. I’m not naive for example in not understanding that money and punishment can effect behaviour. But in health care we generally work with amazing people and they are motivated to do good things for patients.
    What do other people think about motivating people?


  2. Andy Wainwright says:

    Thanks for the blog Jim – I agree with Karl -great to have your ongoing mentorship via this
    – re Motivation, I have just read book recommendation – Drive by Daniel Pink – has really good insights into motivators which he summarises as ‘autonomy, mastery and purpose’ – well worth the read to understand motivation for 21st century


  3. clinicalleadershipadvice says:

    Thanks Andy. Daniel Pink summarises what we all know intuitively that what motivates us is being engaged in meaningful work. What is surprising is that in many cases the ‘system’ doesn’t recognize that or isn’t designed to facilitate that. Keep,those comments coming. Jim


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