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Listened to Dr. John Oesch, from the Rotman School of Management, speak on Five Unusual Ideas About Change at the Strategic Capabilities Network in Toronto today. His observations were a stimulating introduction on how to improve the management of change in our organizations.
Part of his presentation showed the classic Prospect Theory developed by Dr. Daniel Kahneman from Princeton University. Oesch related this theory to change and how we can apply it. But my mind saw the theory’s impact upon employee recognition and better understanding people’s evaluative processes.
Originally built on from empirical findings, the Prospect Theory describes how individuals evaluate potential losses and gains with the original experiments having the prospect as a lottery.
In principle the Prospect Theory suggests an interesting relationship between objective (quantifiable) value and subjective (qualitative) value. Accordingly, losses have a more emotional impact than an equivalent amount of gains.
Perhaps this explains the reason why people leave organizations where there is a lack of or no recognition because they will do more to avoid the pain or loss. At the same time in organizations where recognition appears to be well delivered, after receiving multiple and ongoing recognition actions, the degree of benefit perceived, the subjective value, actually lessens over time. In fact, it would take a lot more recognition to fill the equivalent amount of perceived loss or lack of recognition.
Prospect Theory could imply that losses or lack of recognition are weighted greater or more heavily than an equivalent amount of recognition.
I haven’t found any equivalent studies on rewards and recognition, but that’s where my mind was heading after Dr. Oesch’s presentation.
Part of his presentation showed the classic Prospect Theory developed by Dr. Daniel Kahneman from Princeton University. Oesch related this theory to change and how we can apply it. But my mind saw the theory’s impact upon employee recognition and better understanding people’s evaluative processes.
Originally built on from empirical findings, the Prospect Theory describes how individuals evaluate potential losses and gains with the original experiments having the prospect as a lottery.
In principle the Prospect Theory suggests an interesting relationship between objective (quantifiable) value and subjective (qualitative) value. Accordingly, losses have a more emotional impact than an equivalent amount of gains.
Perhaps this explains the reason why people leave organizations where there is a lack of or no recognition because they will do more to avoid the pain or loss. At the same time in organizations where recognition appears to be well delivered, after receiving multiple and ongoing recognition actions, the degree of benefit perceived, the subjective value, actually lessens over time. In fact, it would take a lot more recognition to fill the equivalent amount of perceived loss or lack of recognition.
Prospect Theory could imply that losses or lack of recognition are weighted greater or more heavily than an equivalent amount of recognition.
I haven’t found any equivalent studies on rewards and recognition, but that’s where my mind was heading after Dr. Oesch’s presentation.
I'm not sure if I'm following your point... based on the logic presented (I haven't yet linked to theory yet) it would be in a companies best interest to never offer recognition.
ReplyDeleteIf I offer recognition - I'm stuck in an infinite upward slope of providing more and more recognition in order to offset the potential negative of not meeting expectations - increasing the emotional loss if the employee thinks recognition is lacking.
However, if I never offer recognition I don't have to worry about the "loss" of recognition being a factor in employee turnover. But we all know that recognition is one of the most important elements of engagement.
It seems that this analysis shows the recognition is a no-win situation.
Gee, good discussion point, Paul. Thanks for sharing your insights on this.
ReplyDeleteMy yesterday morning immediate musings were more on understanding:
1. Consideration for why a lack of recognition can so quickly equate with leaving, and
2. That ongoing recognition giving, can possibly level off in its perceived value over time.
Remember, the Prospect Theory has more of a monetary component (lotteries, stocks, etc.)as valued against people's perceived subjective opinions of risk.
I wondered if it could explain why even a small amount of "lack of recognition" is perceived greater than the equivalent "received recognition".
I think this speaks to an earlier post on Rewards and Recognition and the dilemma the industry has sometimes created by not clearly defining or delineating between "rewards" and "recognition".
Perhaps this theory will have more relevance with rewards than with recognition but let me add some thoughts to yours.
To your point, that it would be better for companies to not even give employees recognition, I would agree...IF it is done for the wrong reasons and without being delivered authentically. Some companies have recognition "programs" that are executed poorly because recognition "practices" are artificial or non-existent.
If you are going to address recognition properly and give it right, you better address the culture, people skill competencies, education and accountbaility for giving effective recognition. Don't just say, "we give recognition" and employees ask, "where?"
I also think the infinite upward cycle you speak of having to provide more and more recognition to offset employee emotional loss of no recognition, would more fit the reward paradigm than a "Real Recognition" philosophy.
The solution to not falling into this Propsect Theory assymetrical "S" curve trap, is to remember that recognition is more than just tangibles, which I think will more solidly fit the theory.
You and I know that recognition is about people and relationships, not just "things".
It's about respect and common courtesies in the workplace. It's about encouraging people to be innovative and then highlighting achievements made from everyone. It's about valuing each person's contribution no matter how small. It's about giving people autonomy and authority to do the right things for the right reasons.
When we do these and all other behaviors and actions which create an engaged company and engaged employees, then I think we turn the Prospect Theory upside down and even out of the picture.
I will never pretend the Prospect Theory is a perfect fit.
But it did create some discussion!
Regards,
Roy
I think the big thing is the "value" issue - the tangibility if you will of the recognition. As I know you espouse - recognition is an act not an item.
ReplyDeleteI wonder how one would test this same theory using only "recognition the act" without the attendant award? I'm going to go out on a limb and suggest it wouldn't hold up. The theory only works when there is some tangible value to the reward. If I'm right - it would indicate you would do better without the award and focus solely on the recognition.
Good stuff.
I think we're on the same page, Paul.
ReplyDeleteThe recognition as an act (the care, time, and effort put into it) can give a greater INtangible value to anyTHING that we actually give to people.
Certainly my focus is on the execution of recognition touch points.
I often teach that "recognition is a managed experience while awards are an honored experience".
In reality the Prospect Theory is a transactional tool and not transformational. The math behind it may have some correlaries to intangibles but I'll have to do some more research to confirm or deny.
Let's make sure that what we DO deliver as recognition is a positive experience in the eyes of the beholder.
Roy, Paul, Thank you for such a thoughtyful dialouge about recognition. I don't profess to have grasped the entire framework or its implications, but what I took away from thhis theory was the budding acknowledgement that utility/value/etc. for humans is very powerfully influenced by FRAMES and REFERENCE POINTS. -- Even more so, the idea of loss and gain is inherently influenced by these frames. This is a huge concept to me (and apperently econcomics as well, based on the article.) We tend to sometimes be binary about whether recognition is the act or the award, when in reality it depends on the frame the individual is bringing to the scenario. If I personally (or in a large meeting) point out that one of my employees did a great job, this might be well recieved (if for, example, her frame is that I've never done so before) or poorly recieved (if for example she's worked hundreds of extra hours to bring a project in on time and on budget) In scenario B, her frame may be "that's all I get for all that extra work??". Coaching managers to help them understand the power of these frames is probably just as crucial as coaching about recognition itself. . .
ReplyDelete