“Performance is not the only thing managers should incentivise”, an interview with Dr. Guy Hochman

We sat down (online, that is) with Dr. Guy Hochman from the Interdisciplinary Center in Israel in an attempt to figure out what keeps employees motivated and what are some of the most common misconceptions managers have towards using rewards.

Hochman’s research focuses on behavioral economics, the cognitive processes underlying decision making, and organizational behaviour. His recent research, co-authored with professor Dan Ariely examines random incentives verses performance based incentives in the work place and will be published soon.

In one of your previous papers, you talk about motivating people, through rewards or other means. In the psychological aspect, what do you think are the building blocks of motivation?

I think that motivation cannot be obtained without a clear definition of the goals to be reached, as well as commitment of employees to the goals and a sense of efficacy. These are the building blocks of motivation. If people don’t know exactly what they need to do (a clear goal), and if they are not committed to this goal and believe they have the power (and ability) to reach it, they will never be motivated to perform.

Would you answer the first question in the same way if it was asked 30 years ago?

I believe not. I think the field of motivation have changed tremendously in the last few decades. Previously, motivation was more about getting the most out of the employee for less. The focus was on getting the job done – the organizational goal. Today we know that people play a major part in motivation. To motivate people it is not enough to ask them to do well and offer them external incentives. We need to empower people and make them a part of the process.

What are the key components of employee motivation? 

Motivating people is similar – whether it is to perform well at work, to live healthier, to study and so forth. The key components involve both extrinsic and intrinsic incentive. Since motivation is about exerting effort, it is important to provide external incentives, so that people will feel their hard work is being noticed and appreciated. And intrinsic incentives are important to make them feel good about themselves and about their effort and achievements.

Do you have a real life example of motivational change in a company?

There are many real life examples. One of my favorite involves pro-social motivation. For example, pharmaceutical sales reps in a Belgium firm were offered a monetary bonus of 15 EURO. In one condition, the money was intended for a personal use while in the second condition, they had to use it to buy something for one of their friends at work. In the time that followed this bonus, employees who got 15 EURO to spend on themselves showed an average increase of 3 EURO in revenues, while those who had to spend it on others increased their revenues by 52 EURO on average. The company invested 15 EURO to get a 3 EURO return when the incentive to perform was external, and 52 EURO when it was internal.

Going back to your paper about rewarding employees, when trying to build a sustainable reward system within an organization, what should managers take into consideration as building blocks for this system?

Managers should understand that motivation is complex, and that there is no panacea (especially not monetary incentives) to motivate people. An efficient reward system should tap on different motivations (e.g., external, internal, prosocial) and use different types of incentives (e.g., money, gifts, verbal rewards, acknowledgements) in order to get motivated employees who are also happy and satisfied with their job.

What do you think are the most common misconceptions managers have towards using rewards as a mean of improving performance?

One of the main misconceptions is that money is the best motivator. While monetary rewards can motivate people, it is not the only motivator, and definitely not the best one. Another misconception is that only performance should be incentivised (pay-per-performance). I am not saying that managers should incentivized mediocrity, but acknowledging and incentivizing employees not only based on their performance (but also based on their efforts, social skills etc.) can be very beneficial to both the organization and the employee.

When thinking of the long run, how can companies maintain an effective system of rewards if, for instance, the same employees are the ones that always win the rewards?

An effective system of reward is a system that uses different types of rewards and different types of criteria (for the bonus). Thinking of the long run, we want to have happy and satisfied employees. This is why we need to create a system that enables many employees to get a recognition (and not just the best employees), and that allow people to feel good about themselves and about their organization. An effective system should be dynamic. We can’t use the same incentives all the time, and we can’t incentivize the same people all the time. The system should define clear goals, and change the criteria for bonuses and acknowledgments often. For example, we can offer a nice getaway to employees who show the most effort one month, provide a monetary incentive the next month, and occasionally give a good word to employees who perform well or just making the workplace a pleasant place to be in.

What fascinates you the most in your fields of research, and what related fields do you think pose the most interesting questioned that haven’t been answered yet?

What fascinates me most is the fact that while human behaviour (and human mind to that matter) is very complex, but there are very simple and subtle interventions that we can design to make them better decision makers. One of the most interesting related fields is human-machine interaction. The increasing reliance on technology raises some interesting and important questions about its effect on human behaviour.