Hi! Managers: Doing the right thing - it's priceless

So, if happy customers are a good thing, and even happier customers are an even better thing, it seems natural that one line of thought would be to incentivise my team to improve customer service. Given that noble goal of improving customer satisfaction, let’s imagine for a moment that I wanted to create a reward system to improve customer satisfaction.
We currently use two systems to measure our customer satisfaction on a continual basis: the first is an instant good/bad rating for each service request we complete, and the second is a quarterly short survey sent to every customer based on the Net Promoter Score (NPS) methodology. The NPS uses a 0-10 scale on what is known as “The Ultimate Question” which simply asks “Would you recommend us to a friend or colleague?”
We’ve got plenty of data, historical and ongoing. It would seem simple enough to create a reward system that provided incentives to individuals in customer facing roles, or teams whose collective scores beat targets, improved or were the top performing. This would be simple to construct, measure and we’d probably see some improvement, in the short term. An increasing body of research shows that incentives like this, over time, tend to do more harm than good.
The first and most obvious downside is simply that as people get more focused on getting the reward, it can lead to unethical behaviour, or other methods to game the system. The reward becomes the reward, not doing the right thing. You end up building a culture where doing the right thing, in this case delighting the customer, is valued not because of what it represents, but because of the reward associated with it.
Over time something much more damaging happens. The rewards can start to have an opposite effect. For instance, in a study done in the 1970s at Stanford by Mark Lepper, he and his colleagues designed a study where participants played games for fun. After a time, they gave rewards for success in the games. What they found, however, was that when they stopped giving rewards, the participants stopped playing. The game wasn’t fun anymore.
Taking good care of a customer, should be a satisfaction in and of itself. Doing the right thing needs to come from an individual's own intrinsic motivation. Which is one way to say it needs to be fun, or at least enjoyable. If someone enjoys the positive feedback from a happy customer, if they get satisfaction from doing their job well, and as a result deliver high customer satisfaction, the primary impact of the reward is to take the intrinsic pleasure out of the activity over time.
Furthermore, in a world where the workplace is more about creative and thinking tasks, incentivising someone to do better with rewards can often yield a negative outcome.
There’s fascinating research around what is known as Duncker’s candle problem. The participant is given the task of fixing a lit candle on a cork board wall in such a way as to stop the candle wax from dripping onto the table below. To do this they are given a candle, a book of matches and box of thumbtacks. There are usually many failed attempts before the solution is discovered: empty the box of thumbtacks, thumbtack the box to the wall, and put the candle in the box.
One fascinating element of this work is that when one group of research participants were given rewards for solving the problem faster. The largest rewards went to the person who did it fastest. A control group were given no incentives and were just told that the research was to find the norms in the time to solve the problem. What the research found was that the incentivised participants took, on average, longer to solve the problem. The stress of the competition limited the creative thinking of the participant.
In what could seem like a simple reward system with only a good outcome, incentivising customer satisfaction could backfire in three critical ways: it encourages (sometimes unethical) behaviour motivated for the wrong reasons, it takes the enjoyment out of what should be an intrinsically satisfying part of the job, and lastly it would reduce the creativity in solving the very problems that enable you to delight customers.
Next time you want to improve the performance of your people, or the key performance indices of your business, I suggest you think long and hard before you set up an incentive-based system. The above examples are just a few within a huge body of research that indicates there are much better ways of motivating your team and improving performance.

Derek Brown is managing director of Pronto Marketing (www.prontomarketing.com), and former marketing director of Microsoft (Thailand). Follow his article in Hi! Managers column every first Friday of the month.