Incentive Programs – Enough Already?

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Corporations have long used incentives to get customers to fall in line. They offer cut-rate leases or zero-percent financing to get consumers to buy cars now. Parents, by the way, do the very same thing when they offer kids an allowance to do their chores or cold, hard cash for getting good grades.

Well, now similar incentives are being rolled out by everyone from employers to insurers offering cash for quitting smoking, taking medicine, even helping reduce corporate travel costs to churches which want people to show up.

Some examples:

  • Last week The New York Times reported on the Energizer Battery Company, which was looking to cut travel costs for its 5,000-plus employees. It’s doing it with an incentive: paying employees – cash – to fly coach rather than business when flying oversees. (Each trip can save the company $1,000 and put $1,000 in the employee’s pocket.)
  • In Philadelphia, people can win $10 to $100 each day they take their blood pressure medication. It’s one of a new systems of monetary payments are now being used to get people to: a) fill their prescriptions (which one-quarter of people don’t do), and b) take their medicine as prescribed (which one-third to one-half don’t do). It costs a bit up front, but has the potential to save $100 billion in health-care costs annually, the Times, which also reported this story said. One-tenth of hospitalizations and one-quarter of nursing home admissions are a result of not taking medicine or taking it incorrectly.
  • Wharton Professor Kevin Volpp, who studies incentives, designed a program for GE – NBC’s parent company – that rewards employees who not only quit smoking but don’t pick it back up with $250 incentive payments every few months along a long road to staying cigarette free. Employees who said they had quit were given saliva and/or urine tests to be sure they were telling the truth.
  • And this past Easter, the Bridge Church of Jacksonville, Florida, offered people who would come to services the opportunity to have their light bill paid. It increased website traffic 100 percent and local businesses piled on to help sponsor the effort.

What’s going on here? Incentive programs – action plans designed to get people to behave as others want – are being implemented right and left. Why? In part because the programs are working. People want to be recognized, they want to do a good job and they want to be rewarded. But they also have personal goals. An incentive program works best when it offers something people want personally and gives it to them for reaching something the other person wants them to do. In other words, when the goals are in sync, it works.

Are there any downsides? Three, actually.

First, falling back into bad habits. You have to ask what happens when the incentive goes away. What happens when someone stops getting paid to take their medicine – do they then stop taking it, or have they realized the health benefits are so great that they decide they’re going to do it just because? In the Philadelphia experiment, some patients complied after the payments ended. Others didn’t. The researchers were quoted in the Times saying continuation of payments wouldn’t be the worst thing but they’re not possible in every case.

A second possible downside? Sometimes incentives bring on behavior that you don’t want. Ken O’Brien was an NFL quarterback in the 1980s and 1990s. Early in his career, he threw a lot of interceptions, so one clever team lawyer wrote a clause into O’Brien’s contract penalizing him for each one he threw. The incentive worked as intended: His interceptions plummeted. But that’s because he stopped throwing the ball. If you start putting $1,000 in an employee’s pocket for flying coach rather than business, one result may be that employees start to take more trips.

Finally there’s the question of acclimation. Once people receive financial incentives, they start to believe they’re owed those incentives. They start to expect them. That’s dangerous. You really want people to understand that what they’re doing is important.

I reported on incentives this morning for the “Today Show” and got a lot of people talking. What do you think of using incentives in your work or in your life?

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