Thursday, February 7, 2008

Group Competition Incentive Pros and Cons

A recent post here highlighted some of the pros and cons of a group competition incentive program. The article pointed to an interesting study which tries to demonstrate how relative rewards play a role in economic motivation.

I responded to the post explaining my reasons for disliking internal competition as a mean to incent employees, including some of the major pitfalls to workforce segmentation for incentive purposes. I also included a reference to a good organizational behavior article from Stanford University, also describing some the risks associated to internal competition.

The pros and cons to internal competition listed by Paul Hebert in his blog were the following:

Pros

  • Fixed (closed budget) - can't go over budget - the awards are fixed
  • Depending on industry and company culture highlighting standings reports on who's in which place in each group can create a real up-tick in performance

Cons

  • Depending on performance distribution it could be difficult or impossible to create fair competitive groups
  • There will be losers - people could double their performance but not earn an award since the outcome is a stack ranking of each person's performance.

To me, the biggest "Con" is that such contests go against the concept of developing the employee's ability to work cooperatively to reach corporate goals. As a matter of fact, it encourages a culture where employees try to outwit each other and loose sight of who the competition really is.

If the goal is to offer an incentive program on a fixed budget, I suggested some alternatives including:

1) Reward all (or a large group) of employees equally, and/or

2) Use the money to purchase some desirable widgets for everyone, great door prizes for quarterly meetings, and to sponsor milestone team events.

Paul replied to my comment saying that there was still a place for internal competition as a short-term adjunct to an entire reward and recognition strategy. I somewhat agree with that statement, but I think that the potential negative outweighs the positive in most situations.

2 comments:

Paul Hebert said...

Julien - I posted today on this - more detail on the "how".

Link here: http://incentive-intelligence.typepad.com/incentive_intelligence/2008/02/class-in-sessio.html

I think we're in general agreement - group competition can be poorly designed and poorly applied. However, there are real business reasons for using it. Thanks for the comments.!

Paul Hebert said...

Relating to the point on relative value of the award. I'm expanding the results of the study that showed that social comparisons can have a huge effect on how we view what might seem like positive events.

From a post on
PsyBlog
: "One striking example is the finding that people prefer to earn $50,000 a year while everyone else earns $25,000, instead of earning $100,000 themselves and having other people earn $200,000 (Solnick & Hemenway, 1998)."

I understand the pitfalls associated with transferring results from one study to a completely different application - on the surface I think it holds.

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Ottawa, Ontario, Canada
Julien Dionne is a well-rounded consultant with global business management experience and outstanding technical, business and leadership skills. He earned a Bachelor of Applied Science in Software Engineering from the University of Ottawa, Canada, and he is a member of the Canadian Professional Sales Association. The views posted within this blog do not reflect the views of Julien’s current or previous employers and clients. Julien can be reached at julien.dionne@gmail.com