Reward Systems – Is “Kerr’s Folly” Alive?

Getting an organization to embrace e-learning as a medium to train its workforce, albeit very challenging, is only half the battle! The other (and often more difficult) half, is to get learners to start using the e-learning modules once the online infrastructure and course library are in place.

One of the more popular practices adopted by corporates to increase e-learning usage among employees is to offer incentives and promotions through “reward programs” to those who complete a stipulated number of online courses. However, if not carefully designed, such reward programs can go completely awry as the following story will testify.

A friend of mine employed with a leading technology company in the US recently shared his organization’s experiment with one such reward program. A couple of years ago, this organization launched it’s e-learning initiative amidst much pomp and fanfare. But even 6-7 months after the launch, the management was struggling to motivate it’s employees to sign up for the online courses. To add to the woes, the drop-out rate was extraordinarily high even among the abysmally few who did manage to enroll for the courses. Finally, the management devised an incentive program wherein employees could notch up reward points for courses completed and certifications achieved. At the end of each quarter, these reward points could be redeemed for goodies ranging from iPods and mobile phones to digital cameras and laptops.

What followed next was pandemonium! The minute the reward program was announced, every single employee signed up for every single course that he/she was eligible to take. Moreover, from that day onwards almost all employees spent a large percentage of their time in office diligently going through one e-learning course after another. Not surprisingly, discussions during lunch and coffee breaks hovered only around one topic… who ranked where on the rewards points table! The buzz that the management had hoped to create about the e-learning initiative had finally arrived, and how!!!

By the end of the third month, an overwhelming majority of employees had completed the maximum number of courses and certifications he/she was eligible to take in that quarter. More importantly, each of them also took home a cartload of dream gadgets. The reward program was a HUMUNGOUS success!!!

But... wait a minute! Was the program really a success???

In 1975, Professor Steven Kerr’s widely circulated article “On the folly of rewarding A, while hoping for B” appeared in the Academy of Management Journal. Professor Kerr observed, “Whether dealing with monkeys, rats, or human beings, it is hardly controversial to state that most organisms seek information concerning what activities are rewarded, and then seek to do (or at least pretend to do) those things, often to the virtual exclusion of activities not rewarded.”

This is exactly what happened in the above case. The reward program got the employees to focus all their energies and efforts towards the activity for which they were being rewarded… which was to complete the e-learning courses. In the bargain, they paid little or no attention to their other tasks and responsibilities. As a result, productivity of the organization suffered and the management was forced to hastily withdraw the reward program at the end of the first quarter itself.

Professor Kerr added, “Numerous examples exist of reward systems that are fouled up in that the types of behavior rewarded are those which the rewarder is trying to discourage, while the behavior desired is not being rewarded at all.”

Does that ring a bell? Ofcourse it does! Haven’t we come across managements talking about nurturing teamwork but actually rewarding best individual performers? Proclaiming commitment to quality but rewarding quantity? Stressing on developing attitudinal skills while rewarding technical accomplishments?

Only goes to show that more than three decades after it was first published, this paradox now known as "Kerr's Folly", is very much alive and kicking in today's organizations!