Jimena Fernandez brings up important points when she exposes the value of respect in maintaining great employees and succeeding as a result. I agree that incentives are fantastic at letting employees know that you value them. However, I diverge just a little when she emphasizes the use of money as incentives.
“Behavioural Economics” is an absolutely fascinating new area of business that is emerging quickly as the solution to human irrationality in business and economics. It addresses topics just like incentives. Here’s how it works:
- People naturally expect that if you pay more, you’ll receive better returns.
- A Behavioural Economist looks at that problem and says “hmm… something’s fishy here.”
- Using scientific experiments, behavioural economics concludes that as the amount of the pay incentive rises within a certain bracket, people actually perform worse.
In short, Behavioural Economics is intended to identify the disastrous mistakes that we make. It’s unwise to not consider behavioural economics – see how Bank of America just put themselves between a rock and a hard place.
I hope that Sauder provides a BE class in the next few years. I strongly believe it will revolutionize business in the next ten years. It’s incredibly useful and very practical – simply because it bridges the gap between complex systems and relatively simple people.
Note: I have been enamoured with Behavioural Economics after reading Dan Ariely’s game-changing book a year and a half ago. Seriously, go read it. Then the sequel. They will blow your mind.
