Tuesday, 22 of May of 2012

Tag » objective

Fear of Loss vs. Joy of Gain – Application in Variable Compensation

Since intuition is rooted in emotions and thus subjective, intuitive approaches allow us to see a single, objective situation as many. We see this most clearly when we tap two distinct, opposing emotions such as the fear of loss versus the joy of gain. The first is generally stronger in people than the second.

In the January 16, 2010 edition of The Economist an article titled “Designing Rewards – Carrots Dressed as Sticks” reported on a paper by Tanjim Hossain of the University of Toronto and John List of the University of Chicago outlining how they made a bonus plan more effective without changing one thing about the plan (i.e. more money, shorter time frame). Rather, they simply changed the wording of the letter outlining the plan’s details.

To one group, they communicated it in the traditional way: hit this target by the end of the week and earn the bonus. However, to another group they said that employees had “provisionally” earned the bonus but would lose it if they did not hit their targets; thus, pitting the “joy of gain” against the “fear of loss.”

Cognitively, objectivity says no difference exists. However, Hossain and List found that the second approach (fear of losing the provisional bonus) was much more motivational than the traditional approach (joy of gaining the bonus). Moreover, the motivational difference persisted over time even after employees understood the bonus better.

In effect, by tapping into the way people intuit different emotions (fear and joy) a single bonus plan becomes two distinct ones. That is the multiplying effect of an intuitive approach.


Problem Solving: Practical Advantages of Intuition

Intuition’s most practical advantage to problem solving is the enhanced sphere of good solutions it offers. Generally, this sphere will produce five types of benefits. They will appear as solutions that can:

  1. Address seemingly intractable problems
  2. Save a tremendous amount of money
  3. Reduce work and headaches to employ
  4. Reach higher levels of effectiveness
  5. Make objective- or scientific-based solutions better

Let’s look at some examples.

We can solve many customer service problems without necessarily solving them directly; we do it by listening, sympathizing and encouraging venting. We can save a tremendous amount of money on moral building efforts; we do it by employing our personal power to remember names, shake hands and extend “thank you’s” which don’t cost a cent. We can reduce the work and headaches involved in disciplinary efforts; we do it through the power of asking and of positive reinforcements. We can reach higher levels of effectiveness in change initiatives; we do it by organizing those emotionally adapt at change and by using compliments to encourage them. Any software rollout becomes better; we do it by selling the effort rather than commanding. Any training becomes better; we do it by influencing expectations beforehand and not just focusing on content and delivery during.

All these solutions employ emotional elements. Listening, sympathizing and venting encourage customers to feel better about a problem. Our personal power encourages employees to feel better about us at no cost. Asking and reinforcing encourages people to feel better about changing their behavior. Uniting emotionally similar people and complimenting them encourages them to feel better about change. Shaping how people feel about software and training encourages them to adopt the new practices.

In short, changing how people feel opens a vast, new sphere of solutions to the problems we face.