When Incentives Drive the Wrong Results
Are you rewards the right result?
Why rewards need to reinforce the outcomes you actually want.
Leaders often introduce incentives with the best intentions.
Complete more projects.
Hit the target.
Increase productivity.
Improve sales.
Reach the goal.
And when the numbers improve, it can appear that the incentive is working.
But there is an important question leaders need to ask:
Are we getting more of the number we are measuring or more of the outcome we actually want?
Those are not always the same thing.
An incentive can successfully change behaviour while unintentionally creating consequences somewhere else in the organization.
Employees may work faster, close more projects, hit more targets or increase output but quality, collaboration, customer experience and long-term results can suffer in the process.
That doesn't necessarily mean incentives are ineffective.
It may mean we are rewarding the wrong thing.
People Pay Attention to What Gets Rewarded
Whether the reward is a bonus, commission, cash incentive, recognition program or another benefit, employees quickly learn what the organization considers important.
If employees are rewarded primarily for speed, they will naturally focus on speed.
If they are rewarded for volume, volume becomes the priority.
If they are rewarded for projects closed, getting projects closed becomes important.
The challenge arises when the metric becomes the goal instead of an indicator of the goal.
I experienced this while working with an organization that rewarded employees based on projects closed and specific performance metrics.
On the surface, the approach made sense. The organization wanted employees to be productive, move work forward and achieve measurable results.
And the incentives did influence behaviour.
But they also created an unintended consequence.
Employees became increasingly focused on completing projects and achieving the metrics tied to their rewards.
In some cases, that focus compromised the quality of the work and, ultimately, the outcomes being delivered to the organization's clients and customers.
The organization was getting more of what it rewarded but not necessarily more of what it ultimately needed.
That experience reinforced an important leadership lesson for me:
Before rewarding a result, leaders need to understand what behaviours that reward is likely to create.
The Question Isn't Just "Did They Hit the Target?"
Performance metrics are important. Organizations need goals, accountability and measurable results.
But a metric should rarely exist in isolation.
Imagine an organization rewards employees for completing projects.
An employee who completes 20 projects may appear to outperform someone who completes 15.
But what if the employee completing 15 projects:
produces higher-quality work
has fewer errors or callbacks
communicates better with customers
supports coworkers when problems arise
follows organizational processes
and creates stronger long-term client relationships
Who actually delivered the better performance?
The answer depends on what the organization values.
This is why incentive programs need to begin with the organizational outcome, not simply the easiest metric to measure.
Instead of asking:
"What can we measure and reward?"
Ask:
"What behaviours and outcomes do we want more of—and how do we reinforce them?"
Cash Doesn't Motivate Everyone the Same Way
There is another assumption leaders sometimes make:
Everyone is motivated by money.
Compensation matters. Employees want to be paid fairly, and financial incentives can absolutely influence behaviour.
But money isn't the only thing people value.
One employee may be energized by public recognition.
Another may value increased responsibility.
Someone else may want autonomy and trust.
Another may be motivated by learning opportunities, advancement or the chance to solve a difficult problem.
Someone may simply want to know that their contribution mattered.
This is where understanding your people becomes incredibly important.
CliftonStrengths Can Help Leaders Understand What People Value
CliftonStrengths isn't a compensation tool, nor should someone's strengths determine how they are paid.
What strengths can do is give leaders valuable insight into what may create meaning, motivation and satisfaction for an individual.
For example, someone with Achiever may gain satisfaction from accomplishing meaningful goals and seeing progress.
Someone with Significance may value knowing that their contribution is important and recognized.
Someone with Competition may enjoy measurable goals and opportunities to perform against a benchmark.
Someone with Learner may place tremendous value on development opportunities and acquiring new skills.
Someone with Responsibility may be motivated by trust, ownership and knowing others are depending on them.
Someone with Relator may value being part of a strong, trusted team more than being individually singled out.
Someone with Maximizer may be energized by opportunities to take something good and make it excellent.
None of these themes tells us exactly how an employee wants to be rewarded.
But they give leaders a better place to start the conversation.
Rather than assuming what motivates someone, ask them.
What makes you feel valued?
What type of recognition is meaningful to you?
What makes a goal motivating?
What opportunities would you like more of?
When do you feel most proud of your work?
Those conversations help leaders understand the person behind the performance.
Reward the "How," Not Just the "What"
One of the most important shifts organizations can make is moving from rewarding only what was achieved to also considering how it was achieved.
“If your organization values customer service, collaboration, quality, safety and accountability, your reward systems should not encourage employees to sacrifice those things in pursuit of another number.”
Consider a project-based incentive.
Instead of rewarding only: Number of projects completed
the organization might consider a more balanced picture that includes: Projects completed + quality + customer outcome + teamwork + adherence to process
The exact measures will be different for every organization.
The principle is what matters: Your incentives should reinforce the behaviours and outcomes your organization says are important.
If teamwork is a core value but your incentives encourage internal competition, employees receive conflicting messages.
If quality is a priority but employees are rewarded almost exclusively for speed, speed will often win.
If customer experience matters but employees receive bonuses primarily for transactions completed, the transaction can become more important than the customer.
Your reward system is communicating your priorities whether you intend it to or not.
Before Creating an Incentive, Work Backwards
Before introducing your next incentive or cash reward, start with the end result.
1. Define the outcome
What are we ultimately trying to achieve?
Not simply the number, the business outcome behind the number.
2. Identify the behaviours
What behaviours consistently produce that outcome?
Think about quality, teamwork, customer service, safety, accountability and sustainable performance.
3. Look for unintended consequences
Ask: "If employees focus heavily on achieving this reward, what might they stop doing or compromise to get there?"
This is one of the most important questions leaders can ask.
4. Understand your people
Don't assume everyone is motivated in the same way.
Use conversations and tools such as CliftonStrengths to better understand what employees value and what helps them feel engaged in their work.
5. Review the results
Don't evaluate an incentive program only by asking whether the metric improved.
Look at what happened around the metric.
Did quality change?
Did customer satisfaction change?
Did collaboration improve or decline?
Did employees find ways to achieve the number that you hadn't anticipated?
Did the incentive strengthen the culture you are trying to build?
Incentives Are Part of Your Leadership System
Rewards don't operate independently from culture.
They tell employees what matters.
They influence where people put their energy.
And they can shape behaviour much more powerfully than the values written on the wall.
That's why leaders need to be intentional about what they recognize, reward and reinforce.
Cash incentives may have a place. Performance metrics certainly have a place.
But neither replaces knowing your people.
The strongest approach brings the two together:
Understand the outcomes your organization needs.
Understand the behaviours that create those outcomes.
Understand what motivates the people responsible for delivering them.
When those three things align, incentives can reinforce performance rather than unintentionally undermine it.
Because ultimately, the question isn't simply:
"Are our employees hitting the numbers?"
It's:
"Are the numbers helping us create the organization, customer experience and results we actually want?"
Final Thought
Take a look at what your organization currently rewards formally and informally.
Are you rewarding the behaviours that create the outcomes you want, or simply the numbers that are easiest to measure?
And just as importantly:
Do you know what makes each of your employees feel valued, motivated and recognized?
At Foundation 34™, we help leaders better understand their people through CliftonStrengths® and strengths-focused leadership development. When leaders understand what drives the individuals on their teams, they can create stronger approaches to recognition, accountability, performance and development while keeping those approaches aligned with the outcomes the organization is working to achieve.
