It seems like such a common sense solution: offering small financial incentives to get someone to do the things you want them to do. However, there are three problems with using small financial incentives.
The first is that once you start a reward system, stopping it inevitably upsets employees. You have probably seen the movie Christmas Vacation. It is a family tradition in many homes (ours included) to watch it every year shortly before Christmas. In the movie Clark Griswold (Chevy Chase) prepays for a pool using money he expects to receive as his annual Christmas bonus. However, his bonus turns out to be a membership to the Jelly of the Month Club. Chaos ensues. Clark had been receiving large bonuses for years and considered them to be part of his annual compensation.
Four reasons incentives can backfire - and what to do about it
If you stop giving out the rewards without giving substantial advance warning, your employees will feel cheated. In their eyes, you will have broken a promise to them. Their trust in you will be diminished. Future efforts to bribe them into desired behavior will be less effective. "Fool me once, shame on you. Fool me twice shame on me."
The second problem with small incentives is that what appears to be an insignificant amount of reward money can add up quickly if the reward is earned frequently and by enough people. Reward contests that earn the winner $200 and the second place finisher $100 given out every other week can translate into what amounts to be a 50 cent an hour raise for each of them. That isn't something that will break the bank, but it does increase your costs. In my eyes, this isn't a major problem, but for some owners it might be.
How Effective is Incentive Compensation?
The final, and to me the biggest, problem with using money to motivate desired behavior is that it leads to employees paying a lot of attention to a specific task or goal and does so to the harm of other duties and objectives. The two most commonly targeted problems contractors try to use reward systems to correct are (1) safety and (2) paperwork.
Safety should be a non-negotiable. If a foreman or worker refuses to work safely, refuses to run or participate in required safety meetings and training, or refuses to follow company procedures after an accident, the best course
of action is to remove that person from your company. Safety should be a zero-tolerance issue. Employees who refuse to follow safety procedures should lose their job before they lose something much more important — their health.
Paperwork is a much trickier subject. This industry is a dog-eat-dog world which results in razor thin margins. Every penny counts. Data collection, management and analysis is one of two ways to ensure you maintain a healthy bottom line. So, yes, we believe recording results, documenting meetings, updating schedules, etc., is an essential field task. Unfortunately not all superintendents and foremen are highly literate. Many struggle with writing coherently. Others just don't feel that paperwork should be a part of their job. Every contractor I have met had at least one field leader who was great at getting work done on time and on budget but was a disaster when it came to paperwork.
So what do you do in that situation? Fire them? You best not. Bribe them? That's walking on thin ice as described above. I strongly recommend coming up with a different solution. You can't afford to fire someone who is great at organizing and completing projects.
I am a huge proponent of bonus plans. Using financial incentives to motivate everyone to help the company succeed is a smart move with proven impact when deployed correctly. Using them to motivate specific behaviors is a dangerous path. Better to lead and manage properly than to opt for the lazy solution which often creates far more problems than it solves.
