World at Work Total Rewards 2017 presentation - lantern group - behavioral science
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Our presentation from the 2017 Total Rewards session that showed how we used behavioral science to change the incentive and total reward framework for Lilly.
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World at Work Total Rewards 2017 presentation - lantern group - behavioral science
- 1. How one company radically changed its incentives using behavioral science James Brewer – Eli Lilly Co Kurt Nelson, PhD – Lantern Group
- 4. But our reward and recognition system had not
- 5. We wanted to use the latest behavioral science to drive the process
- 6. We asked 4 Questions 1. What was the strategic intent 2. How did it impact motivation 3. How was behavior impacted 4. Cost of the program
- 7. The Four Drive Model of Employee Motivation Lawrence & Nohria, 2002
- 8. Acquire & Achieve Driven to acquire things, money, status, rewards and resources Bond & Belong Driven to create positive relationships, engage with others and “fit in” Create & Challenge Driven to create, improve, master, learn and overcome challenges Define & Defend Driven to define our beliefs and purpose and defend our status, ideas, relationships and “tribes” 4-Drive Model
- 9. ORGANIZATIONAL CHANGE doesn’t happen without BEHAVIOR CHANGE
- 10. BEHAVIOR CHANGE happens when MOTIVATION CHANGES ENVIRONMENT CHANGES SOCIAL CONNECTIONS CHANGE or EMOTIONS CHANGE
- 11. MOTIVATION CHANGES happens when YOUR ATTITUDE CHANGES EXTRINSIC REWARDS CHANGE or INTRINSIC DRIVES ARE TAPPED INTO
- 12. Acquire & Achieve Driven to acquire things, money, status, rewards and resources Bond & Belong Driven to create positive relationships, engage with others and “fit in” Create & Challenge Driven to create, improve, master, learn and overcome challenges Define & Defend Driven to define our purpose and defend our status, ideas, relationships and OUR “tribes” 4-Drive Model
- 13. What we found out Mostly focused on satisfying the drive to Acquire & Achieve Inhibiting drive to Bond & Belong and patient focus Not leveraging behavioral principles: • Hedonic Motivation • Perceived unfairness • Idiosyncratic Fit Not leveraging communication aspects: • Framing • Social proof • Cognitive load
- 14. Revamped our reward & recognition framework
- 17. Using behavioral science to design
- 18. Behavioral Economic Principles Hedonic motivation – hedonic (luxurious) awards are more motivating than equivalent cash or other rewards. These types of awards do not result in “indulgence guilt”, fulfill our desire for pleasure, and are perceived as more valuable than their economic cost.
- 19. Behavioral Economic Principles Perceived Fairness – people are highly influenced by a sense of fairness (or really perceived lack of fairness). This impacts both behavior and attitude. “Fairness seems a bit like air – its absence is a lot more noticeable than its presence.” Mathew Liebermann, PhD Research: Ultimatum Game – 2 players split $10. One person makes offer of split, the other decides yes or no to accept. How much do you usually have offer for the 2nd person to accept? ≥$3
- 20. 20 Monkey Business If less than $3 shared – most reject offer Frans deWall
- 21. Behavioral Economic Principles Idiosyncratic fit – When we feel we have a unique advantage in a program or that a program is tailored specifically to us we are more motivated. This sense of unique fit to us fuels our desire to perform – even if the requirements to achieve success are more difficult. Low cost entry fee MeanJoiningLikelihood(0-10) 6 5 4 3 2 High cost entry fee Likelihood of Joining Credit Card Program Ran Kivetz
- 22. Goal gradient theory – Goal motivation increases as people move closer to target. The closer you get to the target, the greater the motivation is to achieve it. Behavioral Economic Principles Research: Buy 10 coffees – get one free! 10 coffee punch card Average 15.6 days 12 coffee punch card with 2 pre-punched Average 12.7 days Ran Kivetz, 2006 Illusionary goal progress – Goal motivation increases even when the progress towards the goal is illusionary. Buy 10 get 1 free FREE X X Buy 12 get 1 free FREE
- 23. How we applied Incentive Design  Team based incentive  Focus on fairness  Customize to individuals  Anchor desired performance  Enhance with hedonic motivators
- 24. Using behavioral science to communicate
- 25. Behavioral Economic Principles Percent that registered before deadline Framing – People react differently to a particular choice or option based on how it is presented (e.g., loss or gain, certainty or uncertain, etc…). Penalty 93% 67% Discount Research: Framing of early registration discount as a penalty or discount?
- 26. Behavioral Economic Principles Social proof (the bandwagon effect) – Tendency of people to assume the actions of others reflect the correct behavior in a given situation. People are more likely to take action or behave in a specific manner if they see others doing the same thing. A B C Research: Which line matches the test line? 75% of participants conformed to the majority view at least once, even when it was clearly incorrect. Solomon Asch Test Line
- 27. Behavioral Science Principles Cognitive Overload – Our short-term memory can only process a limited amount of information. Too much information in too short of period results in information being discarded and memory/processing shutting down. Research: How information is presented can have significant impact on comprehension, processing and retention. Before – 32% retention of key data items After – 67% retention of key data items
- 28. How we applied Incentive Communication  Used campaign approach  Graphically enhanced to clarify and drive behaviors  Framing of communications accordingly  Normative vs. Descriptive  Present vs. Future  Use testimonials/numbers to drive social proof  Communicated desired performance to anchor it in
- 29. How we are using behavioral science today? Rewards & Recognition Fleet Safety Patient Adherence Manager Training Sales Operations
- 30. Thankyou! James Brewer Brewer_james_a@lilly.com Kurt Nelson, PhD. kurt@lanterngroup.com www.linkedin.com/in/kurtwnelson www.linkedin.com/in/jamesabrewer1
Hinweis der Redaktion
- Kurt Welcome James and I are excited to be here to talk about how James company, Eli Lilly transformed its total rewards program using behavioral science principles We will start with some of the background to set the stage Then we’ll quickly talk about the process that we used From there our journey will take us into an examination of some of the behavioral science principles and how they were incorporated And we will wrap up with a quick review of how Lilly has expanded the role of Behavioral Science today
- James: Back story on Lilly’s strategy changing
- James: Overview what the key strategic drivers were
- James: Discussion on how R&R had not kept pace
- James: Talk about bringing in Kurt and BIW
- Kurt w/James color commentary: We started the process by doing what we call a behavioral audit which is designed to understand the underlying root drivers of motivation and behavior This goes beyond survey and questions and included in-depth interviews with custom questions and probes designed to peel back the real drivers We needed to do this since because of the say/do problem. You all know about the say/do problem, right? NO? The say-do problem is the fact that we often answer surveys or questions one way, but behave in a very different manner. This is particularly true when we think or answer questions about what motivates us. There is a multitude of psychological reasons for this – one major one is we don’t really know ourselves and our motivators as well as we think we do Anyway, back to the audit. We analyzed information and interviewed key stakeholders and sales people throughout the company We asked 4 key questions What was the strategic intent How did it impact motivation How was behavior impacted Cost of the program - [James – add in comment here]
- Kurt: We used a number of tools to analyze and assess the information One of the key tools we used was a model of motivation that was originally developed in 2002 by Harvard professors Lawrence and Nohria, I believe this model is the most comprehensive model of employee motivation to date.
- Kurt: So let’s look a little closer at each of the different drives Note – that these are different than Lawrence & Nohria’s original – we modified them based on our own research and work with organizations.
- Kurt
- Kurt: So let’s look a little closer at each of the different drives Note – that these are different than Lawrence & Nohria’s original – we modified them based on our own research and work with organizations.
- James with color commentary by Kurt So what did we find with the audit?
- James: This quantification of information and behavioral drivers led us to work closely with Sr. Management to revamp our R&R framework
- James: First – on our incentive plan…
- Kurt with color commentary by James: We worked well beyond just the incentive plan. It was important for us to ensure that we were satisfying each of the four drives as much as we could. We know that the IC plan by itself was not enough to do this. Let me repeat that – the IC plan could not do this on its own. We looked at a R&R Framework – using different methodologies to tap into the different drives As you can see the IC satisfied
- Kurt with color commentary by James:
- Kurt with color commentary by James: Luxurious rewards provide higher motivation – we often feel guilty for spending money on hedonic or luxurious things – but incentive rewards remove that guilt. Also people tend to perceive the value of those rewards as higher than they actually are. Goods also tend to make more of an impression in our memories than cash – providing greater recall and motivation. In US – we tend to not discuss money – but we will discuss (brag) about winning trips, merchandise, etc (Trophy effect).
- Kurt with color commentary by James: Changes to plans that decrease the perception of fairness can have significant negative impact on performance and overall plan satisfaction. Incentive plans need to ensure that differences between territories or roles be explained and that people understand why they are different. Reward & recognition implications: Compare new plan to last year’s plan My payout compared to peers (perceived fairness) Relativity (internal equity) we judge a thing based on how we think it compares to others Ultimatum Game: the first player (the proposer) receives a sum of money ($10) and proposes how to divide the sum between the proposer and the other player. The second player (the responder) chooses to either accept or reject this proposal. If the second player accepts, the money is split according to the proposal. If the second player rejects, neither player receives any money. The game is typically played only once so that reciprocation is not an issue. Responder usually rejects offer unless it is over $3 - throwing away money just because they feel slighted and not a fair distribution of funds.
- See what happens when researchers provide two different rewards to monkeys doing the same thing. First monkey happy with cucumber to begin 2nd monkey gets grape – 1st monkey sees this 1st monkey now not happy with cucumber when still gets this as reward
- Kurt with color commentary by James: Research – loyalty program for credit card – looked at the likelihood of joining the program – four conditions: 1) low entry fee and double your points when use the card at only YOUR specific grocery / gas chains, 2) low entry fee and double your points when use the card at only ANY grocery / gas chains, 3) high entry fee and double your points when use the card at only YOUR specific grocery / gas chains and 4: high entry fee and double your points when use the card at only ANY grocery / gas chains. Contrary to what you would think – more likely to join when the double points are limited to your specific stores AND even more likely to join if the fee is higher. Irrational belief that the program is customized and limited to YOU.
- Study done with a coffee shop. Two scenarios each focused on buy 10 coffees get 1 free. However, one card had 10 spots on it, one had 12 spots (with 2 pre-filled). The research found that the cards that had the two sections already filled in were turned in faster (15.6 days versus 12.7 days). Over 10,000 cups of coffee were redeemed
- Kurt with color commentary by James:
- Kurt with color commentary by James:
- Kurt with color commentary by James: Framing
- Kurt with color commentary by James:
- Kurt with color commentary by James:
- Kurt with color commentary by James:
- James with color commentary from Kurt