It's time for another reader question – this time, it was a question that came in via Twitter. It was right on point with things I was talking to Paul Akers about in our recent podcast (audio and video).
The question was whether Paul and his company FastCap use incentives or rewards to employees in exchange for their improvement ideas.
Paul's response, where he talks about the pros and (mainly) cons of this approach (with my summary below):
The key points of Paul's response for those who have YouTube blocked at work:
- Paul encourages all employees to call themselves “process engineers” because they all work to improve their processes every day.
- When Paul was “naive” (his word) and before he understood what motivated people, he thought you had to pay people for their ideas ($5 or $10).
- Paul started wondering if people were making improvements just for the money or because it was the right thing to do. He thought the rewards really distorted the motivation for kaizen (to make your work easier and ultimately “make the world a better place.”
- Paul quit giving direct incentives, keeping in mind he pays them well to begin with (including benefits and retirement).
- Stopping the incentives took away a lot of “stress and hassle” from Paul and his people and they have “a much happier culture” adding “it had been a nightmare to manage” the incentives.
- Paul says it's “a joy” to be a part of a kaizen culture because it's not that hard to manage.
When I've help set up kaizen programs in hospitals, we've never done payments or incentives. The focus has been on making your work easier and providing better patient care. That's personally rewarding to people and it's good for the organization.
I agree with Paul's thought that you should pay people well enough that they aren't preoccupied with money (then they can focus on kaizen)… keeping that in “a prudent balance” as Paul says.
When I worked at GM in the mid 1990s, there was a very traditional suggestion box program, with a bonus paid out based on a percentage of the value of the idea. This creates many dysfunctions, including:
- People fight for credit over ideas (especially if just one or two people are going to get rewarded).
- Management has an incentive to downplay the value of an idea, which causes fights and disagreements with people.
- The larger the incentive, the more people are motivated just for that prize and they tend to not focus on the small improvements that are so powerful in the kaizen approach to improvement.
In our upcoming book Healthcare Kaizen, my co-author Joe Swartz and I touch on the topic of rewards.
I share data and examples from organizations, like the lab at Children's Medical Center Dallas (journal article about their lean culture), where there were not direct incentives for kaizen (although it was a factor in one's annual performance review… but performance reviews are different discussion altogether). I know for a fact that you don't need incentives and rewards for kaizen.
At Joe's organization, they do use incentives, but they are small amounts given for the implementation of an idea (not just having the idea). The few dollars' worth of points aren't the primary focus, it's just one form of recognition that fits into all of the other ways they give recognition to people (ranging from bulletin boards to all hands' meetings to an annual awards ceremony). These small recognitions haven't interfered with the development of a kaizen culture and having thousands of small improvements each year.
What are your thoughts and experiences about the use of rewards and incentives? Is it a “necessary evil” in some organizations or cultures? What have you found that works or doesn't work?
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