Researchers at the University of Chicago took advantage of the brain's strong aversion to the loss of anything it values.
They gave teachers a bonus at the beginning of the school year and told them they would have to give the money back if student performance didn't improve.
By the end of the year, students did significantly better on an academic test than demographically similar students. The experiment was done in a high-poverty district.
Previous studies have shown that the lure of a reward at the end of a successful year produced no academic gains. The fear of losing what we already have motivates people more.
Wow! What an intriguing incentive compensation program this could be for retailers! Here's why.
- Focus. It requires clear definition and agreement on what performance earns the bonus.
- Measurement. Both employer and employees must be able to know where they stand vis-a-vis keeping the bonus.
- Motivation. The research found that the fear of losing something we've already received - in this case, an upfront bonus payment - is more motivating than a bonus paid after the fact!
Why Not Try It?
You don't have to totally revamp your incentive compensation program to give this a try. Just pick your spots.
In fact, it may be more appropriate for some of your management team, rather than front line sales associates. The key:
- Have a clear understanding and consensus about what is to be accomplished.
- Decide what that is "worth"; that is, what should the bonus be?
- Pay the bonus upfront.
- Enforce it! If the results are NOT achieved, take back the bonus!
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