Individual motivational ( incentive ) systems kill the team spirit

Individual motivational ( incentive ) systems kill the team spirit

Many companies use for the motivation of their employees – in particular in sales – so called competitive premiums and individual bonuses depending on the individual results.

From my point of view this causes a major problem for the team motivation and the team spirit:

On the one hand the top management always talks about team spirit and requests from their employees team cooperation ( „ We are all members of one big team and we are all sitting in the same boat “ – of course in different classes according to the individual positions! ) – on the other hand the same top management insists on strict individual targets and performance plans. This seems to me to be a clear contradiction!

Quite often this leads to discussions and conflicts between the employees about the fairness of the bonus or premium system. In particular in companies, which have central and regional sales teams the sales people have a tendency to compete against each other by offering the same client higher disounts. The clever client misuses this and plays the sellers off against each other. This leads to „ cannibalism “ of the clients which only damages the image of the company and the outcome is a significant decrease in profit margins. As a result of this the company looses money and earns less profit.

The sales contests, which are only based on the individual results of the seller cause justice problems, fairness problems and have a negative effect on the desired team spirit.

They produce only a few „ winners “, but quite a lot of „ loosers “!

Those contests systematically destroy the team spirit and lead to the demotivation of the individual team members. If the top management demands team spirit and good cooperation among the employees, but the bonus depends only on the individual results, then this has a negative and counterproductive effect on the motivation of the employees.

If you take into consideration, that in many companies the incentive systems focus only on short term results and on the fulfillment of the individual plans, but they do not take into account qualitative, complex and long term tasks, then there can be only one logical conclusion:

The so called incentive systems are absurd and they destroy the individual, internal motivation of the employees and the team spirit!

It is much better to pay fair and motivating individual salaries and to support the team spirit by paying a team spirit. And the top management should not forget: „ If you pay peanuts, then you get monkies“. I doubt, that „ monkies “ have a real team spirit!

Jörg Petzold, PhD.

International consultant and motivational expert

Mobile: 00420-608-737310

Email:   jorg.petzold@gmail.com

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Bonus systems - the poison, which destroys the true motivation

The Czech business newspaper ( Hospodářské Noviny ) published in april the results of a motivation survey among employees in the Czech Republic. According to this survey nearly 80% of  the employees in the Czech Republic are not motivated or even totally demotivated at their job. An alarming high figure, but not really surprising.

People miss a fair renumeration, the oportunity for self realization at their job. They also miss the oportunity to use their creativity and many people feel very uncomfortable with the company culture and the company communication.

People are not robots, where it is enough, just to program them and the robots will do, what the management expects. People are human beings and everyone has his individual character and his individual needs.

Many top managers think, that the best way to motivate the employees is to introduce very complicated and often totally intransparent bonus systems, because money as a motivator has always worked ( or may be not ? ).

My point of view is, that the existing bonus systems in most of the companies are the poison, which does not heel this strong demotivation among employees, but on the contrary it causes the desease.

Bonus systems in the current forms are the dinosaurs of the 21th century and they are dammed to doom ( unless the companies do not get bankrupted before due to totally demotivated employees ).

The defendants of those so called „ motivation systems “ rely on the assumption, that, if you offer a bonus to the employees, they will deliver excellent performance. Those people believe, that employees are like fishes – you just have to offer them an attractive bait ( the bonus! ) and the employees will deliver excellent performance. Fortunately people are not fishes!

Every human being is different and has his own individual motives. Therefore this universal remedy – the standardized bonus system – cannot work.

However, I see the main problem somewhere else: The so called bonus systems are not really bonus systems, but they are malus systems ( the opposite of bonus systems ).

What do I mean with this statement? Let me just show you a classical example from the business practice: During an interview the recruiter asks the candidate for a sales position, how much he would like to earn per month. The candidate would like to earn at least 5.000 Euros gross per month. According to him this amount seems to be an adequate remuneration for his performance. The sales manager tells him: „ Look, we can only pay you 4.000 Euros fix, but if you will reach your targets and perform very well, you can get another 2.000 Euros per month as a bonus. In other words the sales manager wanted to say: „ I am not really convinced, that you will really deliver an excellent performance.So, if I cannot withhold a part of your income, you will not work, like I want you to work.“  The sales manager assumes here ( of course he does not say it like this – it would not sound nice ), that the employee will not deliver a top performance and that for this reason there will be a motivation gap between the actual performance and the potential performance.

The nice bonus turns into an ugly malus!

However, in the awareness of the employee the bonus part always belongs to the income as a fixed part, with which the employee counts. This is an unconsciously effect. Therefore the employee will perceive it as humiliating and demotivating to run after a part of his income, which he believes should rightfully belong to him anyway.

In case, that the employee does not get his planned income ( fixed salary plus bonus – sorry: malus ), he will perceive this unconsciously always as unfair. The management can try ten times to explain him with so called rational arguments, why the employee has not obtained his full bonus. The poison of the bonus ( sorry: malus ) systematically destroys the willingness of the employee to deliver high performance and it also totally destroys his motivation.

There does not exit an absolute fair bonus system, but there are always big justice ( fairness ) problems.

A bonus ( sorry: malus ) is like a hidden threat towards the employee: „ If you do not achieve the targets ( who actually defines the targets ? ) in the way like I want it, than you will not get an important part of your remuneration.“ The bonus as a kind of a negative suspected punishment will lead to the total demotivation of the employees.

The most absurd situation arises in sales, if the management decides ( due to so called strategic reasons ) to link the amount of the bonus only to the sales of certain products. The same management is then surprised, that the sales employees do not do any cross selling and that they only sell certain products.

From my point of view, it is only logical, that that the salesman concentrates on those products, which are directly linked to the amount of his bonus ( sorry: malus ).

In particular in the banking sector ( but not only there! ) the client advisers are forced by absurd bonus systems based on evaluation of the different products in percentage, to sell just those products, which have a direct influence on the amount of their bonus ( sorry: malus ).

Therefore the salesman will not focus on the needs of the client, but on his own needs to sell only those products, which will guarantee him, that he will get his bonus. The satisfaction of the client with the product is not really important here!

The salesman concentrates his energy on the fulfillment of management directives in order to secure his income ( fixed salary plus bonus – sorry: malus ! ).

The result is that the salesman will concentrate only on fulfilling the plan – he will definetly not act like an entrepreneur and he will not try to do his best to provide an excellent service to the customer ( because he is not paid for this! ).

I always thought, that brainless fulfilling of the plan is part of the  so called „ real existing socialism “, which disappeared after the soft revolutions in the communist countries – maybe I am wrong?!

Mechanical and complicated bonus systems do not lead, according to my experience, to a long term better motivation and performance of the employees. They force the employees only to calculate all the time the amount of their potential bonus and they lead to manipulation of the variable part of the employees income. The employees use all their energy to focus on the bonus and they do not focus on the clients needs and on an excellent customer service.

Complicated and intransparent bonus systems prevent and destroy, what they are supposed to support -  the true motivation of the employees, which should focus on their work.

With bonus systems, it is like with the poison arsenic: in small amounts, it cures, in big amounts it kills!

How can we get out of this dead end?

Companies should pay their employees fair and good salaries and then the management should demand from the employees the required performance!

If the management ensures, that the employees can focus on their work and on the client instead of running after the bonus, then the employees will have fun at work, they will be motivated and as a result they will deliver excellent results!

Jörg Petzold, international consultant and motivational expert

How to motivate employees and avoid their demotivation

How to develop your employees and keep their motivation high?

The motivation of its employees is the key success factor for a company. The management should do everything to avoid demotivation of their employees and to support their natural, internal motivation.

How can this be done?

It is necessary to create jobs for people and not to try to form people according to the jobs by   imposing on them an endless number of regulations and management directives.

A manager should allow his employees a maximum of free space for their own decisions. Of course, this also means that the employees have to take over responsibility for their decisions.

The manager should delegate as many tasks as possible to the employees and let them decide on their own, how to deal with them. The employees have to learn to control themselves and the manager should only check the results.

The targets for the employees should be defined in a mutual discussion and the manager and the employees should agree on them. The targets should be determined according to the SMART criteria ( specific, measurable, acceptable, realistic, terminated ). The targets should take into consideration the development and strategic goals of the company, as well as the development of the employees.

The top management of a company should avoid to create an endless amount of rules, regulations and management directives, which only limit the free space of the employees to take their own decisions and take over responsibility for them.

The company should allow flexible working hours and allow employees to work from home

( home office ). This enables the employees to organize themselves and plan their activities according to their own needs.

The top management should determine the working conditions and the working environment for their employees, in such a way, that the employees like their job and the work.

The employees should have fun at work, because if someone has fun at work and enjoys his work, then the results can be extraordinary!

The manager should have enough courage to trust his employees , because trust is the basic condition for a successful cooperation and it supports the motivation of the employees.

Summarizing, we can say that an excellent manager trusts his employees, delegates them as many tasks as possible and allows them to develop their potential.

This is the best, what he can do to motivate his employees!

External motivation as an illusion

External motivation as an illusion: external stimulation systems are like

„ pain killers “ with side effects

During the last couple of months, there has been an on going discussion about how to motivate employees to achieve higher and better results and to increase sales.

The crisis forced companies to reduce costs and to work more efficiently with very often less employees.

The standard management literature offers a wide range of books with titles like e.g. „ How do I motivate my employees in the right way “ or „ The top motivational techniques “.

Nearly every company has its own ( quite often very complicated ) motivational system in the form of a bonus system. All those systems have the same goal: to motivate the employees to achieve better and higher results and/or to increase sales.

But do those systems really work on a long term basis, do they have long lasting positive effects or is it not like this, that many of them just have a short term impact?

Is it may be not even so, that those systems have some problematic side effects and can even lead to the demotivation of many employees?

Based on my own management and consulting experience and based on the intensive study of  the books of the german management bestseller author Reinhard K. Sprenger I would like to discuss those questions in my blog and ask you, the readers, to tell me your opinion.

Lets start with an important question: What is motivation? How can it be defined?

Motivation according to a definition by wikipedia is the driving force which causes us to achieve goals. Motivation is said to be intrinsic or extrinsic. Intrinsic motivation refers to motivation that is driven by an interest or enjoyment in the task itself, and exists within the individual rather than relying on any external pressure.

Extrinsic motivation comes from outside of the individual. Common extrinsic motivations are rewards like money and grades, coercion and threat of punishment. Competition is in general extrinsic because it encourages the performer to win and beat others, not to enjoy the

intrinsic rewards of the activity. ( see definition by wikipedia ).

In other words intrinsic motivation is the individual will of a person to do or to achieve something ( „ I want this “ ), whereas with the extrinsic motivation, a person will only do something, if he is promised a reward ( e.g. a bonus ) or if he has to fear negative consequences (  e.g. punishment ), if he does not do something ( „ I do it, because otherwise I will be punished “ )

True motivation comes from inside – from the internal source of energy, which every human being has inside himself. True motivation comes from the heart and does not need any external stimulation.

The great brains in history like Albert Einstein, Albrecht Schweitzer, Winston Churchill, Henry Ford did not need any external stimulation to create great things.

People like Bill Gates, Steve Jobs, Richard Branson or Tomas Bata created great companies out of nothing. Their motivation came from inside – they all have something in common: the internal will to create something extraordinary. The financial benefits are only the result of their will to create something.

The bonus systems and other external stimulation systems in many companies have only the target to increase the performance of the employees and to fulfill short term company plans.

Alfie Kohn from Harvard university already pointed out, that there does not exit a single study worldwide, which can proove a long term and enduring increase of performance by an external stimulation system.

Of course all those systems have a certain short term effect.

But I believe, that they are like a medicine, which kills the pain for a while, but does not cure the disease. The disease is quite often the fact, that employees, who were originally motivated, when they started working in a company, are now totally demotivated, because they did not get the real chance to use their potential.

Their boss is quite often the source of their demotivation. The boss does not trust his employees, he has a tendency to control them all the time and does not allow them to make their own decisions.

The main argument for bonus systems is the money. It is true, that money is an attractive factor, because it is important for the employees. Nevertheless it only has a very short term effect. An increase in salary or a high bonus usually looses its positive effect the latest after one month.

Many field studies have shown, that other factors are more important for many people.

Factors like fun at work, an interesting and challenging work, a nice and friendly working atmosphere in the company and team work. Employees want to be respected by their boss as individual human beings with their own individual personalities.

I firmly believe, that people are motivated, but it is the job of the manager to make sure that they do not get demotivated by his management style, by too many rules, regulations and restrictions. Management guidelines should be guidelines not a prison for employees.

Long term performance cannot be bought with money alone – money attracts people, but it does not motivate them permanently to increase their performance. You can see this very clearly in sports: Very often it is not the team with the most expensive individual stars, which wins a game, but on the contrary the team, which has the highest team spirit.

If the management of a company does not provide the employees with enough space for free decisions, if it does not offer the employees jobs, where they can enjoy their work and have fun, then the best employees will leave the company very soon.

And even the most sophisticated bonus system will not prevent those demotivated employees from leaving the company.

On the contrary, it can even happen that the top performers will leave, because they are demotivated and the average or underperformers will stay, because at least the salary and the bonus/benefit system is attractive.

Bonus systems, which do not take into consideration the individual needs of the employees will have an opposite, negative effect on the motivation of the employees. They can even lead to internal problems and conflicts e.g. in a sales team, because there are only a few winners, but many loosers. And those employees, who loose in sales contests and do not receive a bonus or a smaller one, than they expected, will be demotivated.

Last but not least, I would like to say, that the management should do everything to support the employees internal motivation and that it should avoid all actions, which could lead to the demotivation of their employees.

Jörg Petzold, PhD.