Psychology of Rewards

some of the core ideas behind why incentive programs exist? How has that shaped the way that they're actually designed in the workplace today? So I think

economists and behaviorophones, we often think about two related challenges.

One of them is what is it that motivates people and understanding how to hit all those various different dimensions and how to interact.

And the other thing that we often think about is who knows what, right? Management doesn't know everything, can't monitor perfectly all the time what's going on with the folks that they're trying to incentivize, whether they're high-powered executives like the folks that you deal with or whether they're more humble folks like me.

And so trying to think about How difficult is it to monitor what they're doing? What is measurable? What isn't measurable? So that information flow is one side and the incentives, what people respond to and care about are the other side, I think, that are big in this literature.

Off of what Cameron was saying, particularly as you think about senior executives, it kind of starts with this baseline of how you know what your executive team is doing, what are they motivated by, what are they driving towards.

And it's kind of evolved as both an internal messaging tool to that leadership team about what you think is important, and it's what behaviors you want them to model, but it's also an external messaging tool, particularly in the public company space.

Where these programs are disclosed and so you can highlight what is important to your business, to your board and to your management team based on what you are paying your executives on.

Yeah.

Great.

And Cameron, you mentioned something that I thought was pretty interesting about the difference between a senior executive or a humble person like yourself.

What are some of the puts and takes between what might incentivize a senior executive versus someone that's working in a small family business? Is it anything besides to pay quantum or are there other things at play as well?

Well, I mean, before thinking about how they differ, right, one of the keys is that money to be used to buy material goods is one thing.

Money as a signal of status is another thing.

And those might be very different.

They could matter to folks all up and down the spectrum of prestige.

But social standing comes in other forms as well.

And so understanding what delivers social standing, and that might be very different between chief executives and line workers, for instance.

Understanding where that social standing comes from, I think, is one of the keys and then how that interacts with the financial incentives.

That makes a lot of sense.

And Phil, if we just stick to the senior executives specifically, how do incentives vary based on industry, company size, etc.? What are some of the factors that might drive?

Yeah, so there are a million different ways that you can structure incentive programs.

And I think that there are a few factors in play, right? So what we already touched on a little bit is what sort of behaviors are you trying to drive? But I also think that it's important to consider the background of the executive team and where they sit on the I need to pay my mortgage and send my kids to school versus I'm trying to drive generational wealth and how far along they are in their careers.

Right.

So there are people that are towards the end that are CEO and chair, in which case some of your tools for rewarding or incentivizing people that might exist if you are kind of earlier in your career, like you could get promoted or you could get a bigger job.