Productivity with a carrot or stick? Consider I-deals instead

As work patterns change due to the pandemic and many people continue working from home, new questions regarding productivity and performance management have surfaced. Companies around the world have embraced new digital applications, artificial intelligence (AI), and cloud-based solutions to keep businesses running. The good news is that new digital tools, online processing, file sharing, workflow, and other tools have made a good impact with productivity in many cases.

At the same time, we are witnessing the “Great Resignation,” which has placed more pressure on employers for retaining people and sometimes the need for doing more with fewer workers. The tension associated with talent has created new challenges for many managers who were not sure on the best approach to achieve results. The pressure on managers raises the age-old productivity question: what is a better approach, the carrot or the stick? 

The Case for the Carrot (positive reward for good results): We often find managers advocating for paying people more as a key retention tool. This can be especially true when a firm provides bonuses or some type of incentive compensation. It is true that compensation can help with job satisfaction, retention, and productivity, however, compensation alone cannot make much of an impact.

This has been highlighted in several studies over the years to show that compensation is not a top predictor of job satisfaction. A recent study using data from Glassdoor, the firm that seeks greater transparency about employment at various organizations, finds that factors such as the culture of the organization, the quality of senior leadership, and the career opportunities are often more important than money. While rewards and recognition are needed, they are typically rated among the least important factors related to satisfaction and productivity.

The Case for the Stick (negative consequence for poor results): We sometimes find managers, typically inexperienced ones, using threats with their employees in hopes of avoiding failure. While this may seem like an “Old School” practice, the use of negative consequences is unfortunately alive and well in many organizations. This approach can work in the short term as people generally want to avoid failure or bad outcomes, however these strategies will not engage or motivate employees for the long term. While negative consequences may be appropriate as punishment for inappropriate behaviour, it is not a good approach for improving productivity.

Research tells us that culture, values, opportunities, and careers are the most important motivators to achieve above-average productivity. Yet, each organization in each country has a unique culture with unique leadership – and people experience these things at a personal level. While companies can address culture and human resource practices overall, these broad approaches may not fully address the needs or concerns of individual employees. So how do we demonstrate these organizational factors at an individual level in a way that affects productivity?

Idiosyncratic deals (i-Deals) where mutual benefit for the employee and employer is established based on individual circumstances, have become an opportunity to retain and boost productivity recently. Research on i-deals by Professor Denise Rousseau of Carnegie Mellon University shows that these types of arrangements can improve the retention, motivation, and productivity of employees. To illustrate, let’s consider examples:

Arjun works in the finance department of a large corporation that has traditional work hours Monday through Friday. His wife manages a restaurant and works every Saturday, and has Mondays as a day off. Arjun was able to arrange an i-deal with his manager to change his schedule to work on Saturdays instead of Mondays. This unique schedule actually created some benefit for the department as he was able to address urgent issues on Saturdays. Arjun was pleased for this unique arrangement and knew that this would not be feasible at other organizations.

Zena is manager in the customer service department of a manufacturing company. Her career interest is centred on business analytics and has asked her employer to sponsor her tuition in a series of training courses. While tuition expenses would normally not be covered by the company, her manager agreed to pay for this as long as Zena applied what she learned to run some short overview training sessions for the department. This unique deal allowed all of the employees in the department to benefit from the learning. Zena was excited to take on this learning and knew that it was a unique opportunity created by her manager.

These examples may seem simple, yet highlight how it is important to understand what is important to employees and to allow managers to make decisions on somewhat small things that can make a big difference for key employees. When we show employees that we value them with special i-deals, they are more likely to feel a sense of belonging and be engaged in their work activities. This provides an opportunity to bring the culture and values to life for people and boost productivity.

While i-deals may be perceived positively by the employee receiving them, the co-workers may have a different view. It is therefore important that any i-deals are of marginal changes and not viewed as exclusive privileges for a select group. If these deals are perceived as exclusive special perks for a few people, then issues of equity and fairness will certainly surface.  

Of course, there are no magic solutions when it comes to retaining employees, attracting talent, and improving productivity. Good human resource management practices can certainly help in providing a clear employee value proposition as a starting point. For some key employees this may not be enough and perhaps an i-deal of some type may be in order to help secure the talent and the productivity needed for the future.