The Surprising Truth About What De-Motivates Us
I’m a competitive person by nature – everyone would tell you so. I’ve had jobs that give me bonuses based on how well I do compared to others, how well the company does in the market, and how ‘hard’ I work, so to say, based on some arbitrary metrics. I hadn’t thought about bonuses as being de-motivating before because I like to compete (and win). In some of my experience they have driven behaviors of lower collaboration and higher negative competition where the only winner is the company itself and not the individual employee doing the work (and the company can only win in that situation for so long before people get frustrated and either leave or stop trying). Doesn’t sound like the ideal situation.
Some literature that addresses this phenomenon is Drive – The Surprising Truth About What Motivates Us by Daniel Pink. If you haven’t read it you can watch this quick video and it explains most of the premise. Basically what it found is that bonuses for being creative, problem solving, and working smarter on cognitive tasks actually make us perform worse. It seems counter intuitive and I often have people who vehemently disagree with it as I bring it up in classes.
Here’s a not so hypothetical situation. Like many companies, extra incentives and bonuses were part of total compensation. For sales it was commissions, for consulting it was utilization. Salespeople received commission for the amount of services and tooling they sold and this was paid out after the sale closed in monthly increments. This made it so there wasn’t as much of an incentive to sell the right thing or support the sale afterward because the commission was already paid out. However, if the customer cancelled a contract and the revenue wasn’t recognized, the salespeople got a clawback of some of their commission to try and combat that problem.
The other check to that balance was that consultants received bonuses every quarter based on how much of time they were utilized or “billable.” Basically how much of the time they were working on things actually sold and recognizing the revenue that was sold. So consultants should do well at delivering the services so they could receive their bonuses and the contract revenue would be recognized. Salespeople should sell the right things so they would be delivered and the customer would be happy. Sounds like a good deal, right?
Well the issue was that the utilization targets for consultants was an arbitrary percentage that went up when an executive felt the profit and loss sheet needed to look better. Also, the quarterly bonus was fairly nominal for utilization. Since the utilization was based on the sales pipeline and consultants and salespeople weren’t working together all the time to meet the customer need in the best way, it was often not easy to meet the utilization target that was set if you were working on short interactions and small accounts. Salespeople wanted to close the sales by the end of the month and often just sold small things and tried to sell more of them because large accounts take longer to close.
A bonus is supposed to motivate me to try and meet utilization. But if we have people who need to be motivated by money to want to work with clients and be billable, we hired the wrong people in the first place. And those people aren’t going to be motivated by a nominal bonus. Those who do want to work and the bonus could be a nice extra sometimes are unable to get enough time to actually qualify. It goes back the sales cycle and the pipeline.
Now it’s making more sense. If salespeople aren’t selling things that will help you get my bonus and there isn’t enough work to go around it’s pretty discouraging. If you’re not going to make the bonus anyway and the bonus is so small, why should you kill yourself and hit two cities a week to get more billable days when the clients won’t turn into long term work that will help you make the bonus in the future (it’s rhetorical)?
Additionally, the competition started up between consultants for billable work. A lot was based on seniority. If you were more senior you received a longer and more stable contract with a client and easily made your bonus. If you were less senior or had just switched accounts you had to pick up smaller work in between and scrounge for it. For a company that prides itself on collaboration and learning from others, only one consultant can be billable for a particular offering but they are required to deliver together before individually on a particular course offering. So then it’s splitting utilization and billing time. So now you’re flying in and splitting time with other consultants and that is taking time away that you could be billing individually and you still won’t make that bonus even though you want to. So it makes you want to work with others less.
What if you’re still struggling to meet your utilization target and was taking all work you can? What if you were told you were getting a client and not to pick any other work up going forward. BUT it wasn’t communicated to others that you were getting a client and were instructed to remain free so it looked like you were refusing billable work and travel. That’s not going to make the reputation or motivation look good.
Another scenario: what if you were told you would need to let someone else bill on a client because they were on a list for not billing enough (when you still were not meeting the maximum target)? So you had to put yourself in danger to help someone else not get in trouble. What’s to say you wouldn’t end up on a list? NOW we care about being a team?
What seemed like a motivating idea to help out the company is actually hurting the company and its employees in these cases…
I understand that companies need to have sales and billable consultants to make money. That’s a duh. But by putting that bonus and target out there, I want to know how the system changed. Did people actually work more and make a difference on bottom line? Because if it did without the sales pipeline increasing (because I don’t know if there was a change to commissions), then the company had hired unmotivated people in the first place. If it didn’t change, then the company put a ton of stress and hung a unattainable target over many heads of people who wanted to do the best for the company and client anyway. Daniel Pink would say “I told you so.” He’s not wrong.
agile billable bonus collaboration commission competition corporate demotivation drive daniel pink failure incentives meritocracy motivation productivity retrospective teamwork utilization value add
Wow, that’s a lot to chew on! Thanks for sharing such a rich example of how a common bonus structure hinders the collaborative behaviors that could enable more success.