We all understand what a material set of drivers are.
What are the benefits and the weaknesses of this model?
First of all,
to be very clear, they are only effective under very narrow sets of circumstances.
In other words, if I can be absolutely certain as an organization that by
incentivizing someone to sell more that they will actually help the organization,
than that's fine.
But if by selling more, by pushing very hard, I end up
actually damaging things for somebody else in the organization, or perhaps selling
something in the short term which damages us in the long term, it actually hurts us.
So there are very small number of situations.
And I'm not convinced that many banks actually have this situation.
Where benefits which are
directly relinking money to volume of sales, a good thing.
So they provide this direct link, which makes some people very happy.
It makes people very comfortable.
They're very kind of easy to use, because it's much easier to
design a system based around these material rewards.
But, ultimately they also have bring with them enormous costs.
One of the costs is that extrinsic rewards,
material drivers tend to drive out the intrinsic.
In other words, if I am obsessed about making a bonus,
I stop worrying about what's good for the organization.
I just care about what's good for me.
They can also incentivize exactly the wrong behaviours.
They can incentivize me to, for example,
focus on selling this month, and actually sometimes do damage in the longer term.
And they also lack flexibility, they tend to focus us on
a particular prescribed set of behaviours, and avoid a broader set.
So I'm not saying that material drivers are a bad thing.
I'm just saying they are typically overused as a method for
evaluating and rewarding people.
And one of the reasons why that is the case is simply because so
many organizations, so many banks in particular have got into
the situation where they're giving these rewards.
It's very difficult to then take those away.