Do financial incentives work in Lean?

Do financial incentives work in Lean?

Yes, financial incentives work, when done right and for the correct things.

When I have this discussion with people, I always start the conversation by asking what happens if you stop paying your employees. Obviously, the financial incentive of a paycheck makes the person show up to work. So the underlying principle—that people do things to get money—is sound.

For a short time, financial incentives can make a person work harder. Over the long haul, though, a person can’t keep up with working beyond their comfortable pace, and problems come up.

Financial incentives do, however, work to alter behaviors within a person’s skillset. The problem is that they don’t work when the outcome is based on complicated tasks.

Think of a server at a restaurant. They are motivated by tips. Over time, they learn what behaviors work to get the biggest tips. These behaviors don’t require any specific skills, though.

An engineer, on the other hand can’t be easily paid to come up with more or better designs. If you have an engineer on your staff who is unmotivated, that is a different issue. But presumably, all of the engineers on your team are working diligently. You can’t simply pay an engineer more to suddenly become creative, or to have more inspirations.

What you can do, though, is give incentives to people to get more skills. Many companies already do this. They pay for college classes or career enrichment classes. And they pay more to people with advanced degrees that help the job. If you want to give incentives to people doing complicated tasks, think long term skill building, not short-term performance.

NOTE: I have another related article on financial incentives.