PRODUCTHEAD: Incentives and behaviour
PRODUCTHEAD is a regular newsletter of product management goodness,
curated by Jock Busuttil.
if you say the product
Financial rewards alone for complex work can have the opposite of the intended effect
Even a small perceived penalty is enough to discourage experimentation, learning and success
A large part of our behaviour is influenced by our peer group
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While looking at the current market for electric vehicles, I began to notice how some smaller cars with limited range seemed over-priced, while others seemed to have been stripped to bare bones to bring the price down. The car prices seemed to aggregate at just below the £35,000 mark.
Why? In the UK, a government grant is available to subsidise the cost of pure battery electric vehicles costing less than £35,000. While the financial incentive is intended to encourage people to buy more electric vehicles, it appears instead to cause manufacturers to set car prices at just below that threshold, even if the car would have ordinarily been cheaper to begin with. (“Why leave money on the table?”)
Employee incentives don’t work
This week I have a gem of an article for you that it is both enlightening and alarming in equal measure.
Alfie Kohn explains why incentives — rewards or punishments — produce at best a temporary change in behaviour, and at worst undermine the quality of work and the desire to collaborate. It’s a resonant article that chimes with my own experience of employee incentives and the problems that come with them. I’m sure you’ll feel the same way once you’ve read it.
However, the article is also alarming. At one point Kohn notes that the thinking on incentives hasn’t changed in forty years. The problem is that his article was published in 1993, so really the thinking hasn’t changed in nearly seventy years.
Financial incentives are quantifiable
Just as a delivery firm calculates it will be more profitable to absorb the fines it incurs from its drivers making quicker deliveries while parked illegally, rewards and punishments force us to calculate whether the incentive is worth the effort.
The ‘golden handcuffs’ of promised future share options may only work as an incentive for employees to stay until a better-paid job offer comes up elsewhere.
Encouraging the wrong behaviour
I’ve observed incentive schemes go awry in different ways, sometimes because they inadvertently encourage the wrong action, sometimes because they actively set individuals and teams in competition with each other to the detriment of collaboration.
How many times have you worked in a siloed organisation in which different departments can’t spare the time / budget / effort to help each other? Often the reason is that collaborating would distract the team from hitting their arbitrary target, which in turn dictates whether they earn performance-related rewards.
Or what about the sales team at Experian I worked with that received a healthy commission on one particular product? They would give away everything else we sold for free to sweeten the deal for the customer and win that sale. The company got exactly what it had asked the sales team for, but at the greater cost of lost revenue on everything else.
If every product the sales team discounted had also subtracted from their commission, then maybe we’d have seen a different result.
Social interactions help to drive our behaviour
Alex Pentland, Professor at MIT and author of Social Physics, tells us that thinking of what drives the behaviour of individuals is only half of the story. The other half is that our behaviour is mostly influenced by the actions of, and our interactions with others in our peer group. Or to put it another way, we’re more likely to adopt a behaviour for ourselves if it feels like the social norm to us in our particular cultural bubble.
This can be beneficial when the prevailing behaviour is positive, such as for teams that are empowered to use their expertise and evidence to challenge assumptions and try out new things.
Of course, it can also be detrimental when echo chambers form and reinforce undesirable behaviours such as discrimination against one group by another, belief in conspiracy theories, or a willingness to watch Adam Sandler movies.
Surround yourself with exemplary people
One thing is clear, however: while we all have individual agency, we are most strongly influenced by what the people around us collectively do and say.
If you want to change your behaviour for the better, the most effective incentive is to surround yourself with shining examples of the behaviour you wish to emulate.
Speak to you soon,
what to think about this week
According to numerous studies in laboratories, workplaces, classrooms, and other settings, rewards typically undermine the very processes they are intended to enhance. The findings suggest that the failure of any given incentive program is due less to a glitch in that program than to the inadequacy of the psychological assumptions that ground all such plans.
[ALFIE KOHN / HARVARD BUSINESS REVIEW]
When 50,000 of Mark Rober’s 3 million YouTube subscribers participated in a basic coding challenge, the data all pointed to what Rober has dubbed the Super Mario Effect. The YouTube star and former NASA engineer describes how this data-backed mindset for life gamification has stuck with him along his journey, and how it impacts the ways he helps (or tricks) his viewers into learning science, engineering, and design.
[MARK ROBER / TEDxPENN]
Author of Social Physics Alex Pentland asks whether we can do a better job of understanding our societies and our companies using data and statistics.
[LIVING INNOVATION / YOUTUBE]
Whether you’re new to product management or have been a product manager for years, a coaching session can help you to step up your career.
We’ve coached people wanting to get into product management, product people with nobody in their organisation to manage them, and experienced product managers preparing to apply for a promotion.
We can help you prepare for your product manager interview, including mock interviews.
A proportion of the fees from every coaching session is donated to charity.
“Jock has been instrumental in my personal growth as a product leader but also as a person.”
Co-founder & Chief Product Officer, Napo
There is a big difference between persistent models and work (or goal) related models. OKRs, for example, are a work related model. Work related models involve a specific time-span (e.g. a quarter). The team attempts to achieve The Goal by end-of-quarter. Meanwhile, a north star metric and related inputs persist for as long as the strategy holds (often 1-3 years).
[JOHN CUTLER / THE BEAUTIFUL MESS]
Teams often jump straight to metrics and measurement. Or they copy what they think Company X does based on a blog post, assuming Company X has it all figured out (they don’t). They skip the most important part: exploring and clarifying their OWN ideas, beliefs, and assumptions. As tempting as it might be, it really pays to avoid outsourcing this thinking. In the exercise we focus on words and clarity.
[JOHN CUTLER / THE BEAUTIFUL MESS]
Because so much of product management is about working with people, it’s important to take time to reflect on the kind of first impression you make to those people. In this latest entry for my series of 100 things I’ve learned about product management, I share some coaching advice to help you make the best possible impression every time you start working somewhere new.
[I MANAGE PRODUCTS]
Recently people all seem to be encountering the same problem. Their engineering teams are choosing to work on projects that make them look busy, but which don’t actually move things forward. What they’re usually working on is a convoluted — and arguably doomed — attempt to replatform a legacy ‘cash cow’ product.
[I MANAGE PRODUCTS]
A recent tweet by John Cutler provoked some interesting reactions. It got me thinking about whether there are unifying principles of product management that apply in all contexts.
[I MANAGE PRODUCTS]
upcoming talks and events
I’ve spoken at various product management and technology conferences around the world and online. I share ideas primarily on the topic of product management, and this tends to overlap with agile and ethical product development, leadership and strategy, and fostering healthy product cultures and communities.
“Day 2 saw an impressive presentation by Jock Busuttil on user testing. He asked the attendees to lend each other a smartphone and take a picture. What a turmoil that caused ;-) ”
Marketing & Business Development Director, BlueGlass Interactive
If you’d like to book me to speak at your event, please get in touch.
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PRODUCTHEAD is a newsletter for product people of all varieties, and is lovingly crafted because I am intrinsically motivated to do so. (You’re welcome.)
Read more from Jock
The Practitioner's Guide To Product Management
by Jock Busuttil
“This is a great book for Product Managers or those considering a career in Product Management.”— Lyndsay Denton