I was working with a pharmaceutical distribution business that needed to innovate, and fast. Drugs were coming off-patent, and industry forces were going to change who made money and how. The MD was worried.

He was also frustrated that his senior managers, who he described as excellent operations people, were failing to come up with innovative responses to the new needs of their customers.

As we discussed his objectives, he was able to paint a picture of how he wanted these managers to innovate.

Then he said, “But they damn well better still hit their monthly KPIs.”

This was just not going to work.

Why?

Well put yourself in the shoes of the managers. Their incentives are clearly to keep operating well and not to worry about the innovation.

Here’s how it goes in the mind of the manager: “If I try to innovate, I’ll have to find the extra time by working longer hours, and I may well end up failing, which, whatever people say, will probably be held against me later. But if I just keep on operating, all that will happen is I will get whinged at by the MD. Big deal. It’s not a sacking offense is it? Anyway, I know the system really well. They need me to make sure the drugs get delivered. On the other hand, if I MISS my KPIs, then I’ll have real trouble.”

Only by changing the incentives could the MD hope to get these managers to give innovation some serious attention.

These sorts of calculations are done instantaneously, often unconsciously. If you are finding that people agree to cross-sell, report problems or support strategic changes, but then don’t, ask yourself how they are weighing up the various incentives.

In my last newsletter, I recommended that you do this by putting yourself in your employees’ shoes and asking four questions:

  • What will happen if I do?
  • What will happen if I don’t?
  • What won’t happen if I do?
  • What won’t happen if I don’t?

I’ve come up with a visual for this: I call it the Incentive Audit. Last week I gave a talk about the role of fear in organizations, and I showed the visual. The audience found it valuable, so here it is:

Andy’s Advice: How to use this in your company

If you are frustrated because people aren’t following through, develop your empathy for the way those people weigh up incentives by putting yourself in your employees’ shoes. Use this Incentive Audit to make sure your review is comprehensive. What needs to change? Are you asking the impossible? Are you saying one thing while your exemplars are demonstrating another?

Want to know more about rational and irrational fear in organizations? Download my new whitepaper by signing up to the newsletter: “Rationally Fearless: A Leader’s Guide to Bad Fear, Good Fear and No Fear”.

 


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