The levers to influence behavior
Our third article in a series about incentives. Incentives are powerful levers for business leaders to change behavior. Sadly, incentives are often under-utilized and mis-used tools.
Employee behaviors are a crucial element to every aspect of a business. In some regards, the only way to implement a CEO’s strategy is to change behaviors. If behaviors are not changing, plans are not being implemented, and strategic goals are not being achieved.
Executives have at their disposal a set of integrated, inextricable levers to influence employee behaviors to achieve operational, financial, and strategic objectives. The framework illustrated in Figure 1 captures major drivers of employee behavior. In our experience, we have seen this approach work in settings as diverse as Fortune 500 firms, start-ups, governments, sports teams, military units, and non-profits.
Figure 1: Key Levers to Influence Behavior
Every organization has incentives, a culture, and talent and leadership pipelines, whether they know it or not. Every organization performs the recruiting and training functions (though not necessarily through formal departments) and reports on its finances and operations.
Every business leader has the levers to influence behavior. The task at-hand is to link these levers to specific behaviors and to link behaviors to strategy in a clear, analytical way.
Behaviors – The first step is to identify what behaviors the organization needs. This should be driven by strategic objectives. The second step is to articulate the behaviors: what are the norms and outliers, both good and bad, for common and important use cases. The third step is to design the levers in a way that elicits the desired behaviors.
Incentives – Financial incentives dominate thinking, but there are other incentives to keep in mind, e.g., professional, social, and psychological ones. Before increasing financial incentives, which gets expensive, managers should think through the incentive mix and how high-ROI incentives can achieve desired behaviors. Managers will need to anticipate how staff will respond to any proposed set of incentives.
Culture – Norms, expectations, standards, processes, values, attitudes are all elements of culture. Together and separately, these elements influence employee behaviors. Entire bodies of knowledge are devoted to culture. Suffice it to say that culture is instrumental to influencing behavior.
Recruiting – Employees join the organization with a set of behaviors and expectations about how to behave. The recruiting function should acquire desired behaviors in the labor market and set behavioral expectations for incoming staff.
Learning & growth – Managers must identify gaps between ideal and actual behaviors and develop efficient and effective training plans to close those gaps.
Pipelines – Talent & leadership pipelines signal what behaviors the enterprise wants. It also stocks leadership ranks with people who exhibit the firm’s desired behaviors.
Reporting – What behaviors are being exhibited? What incentives are people responding to? Is training closing the gap between actual and ideal behaviors? The reporting function answers these questions and more. The processes around reporting, e.g., who receives what information when, is a primary mechanism through which behaviors are changed.
In sum, business leaders should articulate the links between behavioral levers, desired behaviors, and strategic objectives. The levers should operate in a cohesive integrated strategy to encourage desired behaviors, and the desired behaviors should be linked to strategic objectives.