In a previously published article (“Organization Management Based on a Classification of the Structures of Tasks Handled by Personnel,” in the third issue of Entrepreneurship Insights in June 2007) which looked at the way people make decisions, the author examined one of the major factors that influence behavior when making a selection: the structure of the task being tackled. As was shown, so-called “closed” and “open” tasks involving uncertainty—that is, entailing risk—are of the greatest interest for research.
Other important factors (or groups of factors), however, also have an effect on the actual choice of decision. They can be illustrated by the diagram below (see Fig. 1).
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Fig. 1. Groups of factors that influence the content of the decisions taken. |
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The present article will examine a second factor: motivating the accomplishment of tasks of various types.
Suppose we have a “closed” task with a risk, where all the possible alternatives for its solution are designated in the initial data (for a more detailed description of a “closed” task with a risk, see the June 2007 article – Editor’s Note). Suppose, also, that we have a criterion for evaluating the decision alternatives, such as, for example, minimum expenses with the assigned outcome, etc. Tasks of this type are tasks, for example, that have to do with planning outcomes of serial production. The enterprise or division engaged in them is assigned a production plan in physical terms, an expense budget, and possibly a few other indicators for evaluation of the outcome as well.
Upon achieving their values at the end of the planning and accounting period, the group of workers is paid the bonus designated at the beginning of this period. If there is any deviation from the values of the evaluation indicators, the amount of the bonus funds changes, both for a downward deviation and for an upward deviation (for example, for additional savings of material resources).
We see that in the example cited here, there is an incentive for achieving the previously selected outcome. The way this outcome was reached (that is, by a chain of which operational decisions) may be of no interest at all to the person assigning the task.
We will call the incentives closely “tied” to a clearly worded final outcome for the activity OUTCOME-BASED INCENTIVES.
In some cases, however, a precise outcome (that is, a variant of performing the task) is impossible to set a priori, because the very task of selecting a decision is a “closed” task in the given case, and takes shape only under the influence of certain circumstances; at the moment of planning, it does not exist as such. As soon as such a task arises, there will also appear both a possibility and a need for performing it. However, when such a task will arise and which set of possible alternative decisions it will involve is an a priori unknown.
Clear examples of such tasks are situations connected with so-called unforeseen failures of elements of engineering infrastructure and equipment, primarily in large enterprises with their own production technology.
Every such failure, if the repair services are currently working at full capacity, requires a decision on the essence of the very same task: to continue the work begun earlier, or to address and deal with the breakdown that has just occurred, and when several breakdowns occur, what sequence to select for attending to them.
Ideally, the sequence of servicing should be such that in total, losses due to the breakdowns for some period of time are minimized. So priority in servicing must be given to orders that involve larger potential losses.
If we calculate the norms (evaluation indicators) for the potential losses for each element of a breakdown, then the normative base will be an excellent selection tool for the task performer. But for such a tool to be put into practice, there must be an interest in employing it. In any case, the sequence of attending to breakdowns can be any one that is convenient and can be based, for example, on friendly relations with one of the clients/customers.
Interest in utilization when performing the tasks of a normative document for evaluating potential losses during breakdowns as a selection tool requires that the incentives being set be closely linked with the need for its practical use. That is, the incentives must be targeted on the tool for performing the task.
Such incentives are appropriately called TOOL-BASED INCENTIVES.
We will proceed to an examination of the incentives for performing “open” tasks involving a risk. These essentially are tasks of an entrepreneurial nature.
The process of performing “open” tasks begins with the creation of the conditions for them (that is, the initial data for task performance), because at the outset only the goal is known in these tasks, while the alternative decisions remain unknown, and consequently all the other parameters (such as possible outcomes and their probability) are unknown as well.
The process of performing an “open” task in its initial phase foresees the creation of a host of possible alternatives for its solution. It is considered that the larger the number of alternatives created, the higher is the probability that this number will also include the most rational decision, that is, one that, in the opinion of the task performer, will be more successful than the other decisions in achieving the goals.
Creating a multitude of alternatives as a stage of task performance in itself is evidence that no outcome can be set by anyone a priori. At the same time, it is obvious that it is also impossible to assign any normative set of tools in the search for decision alternatives, because there exist no normative instruments that make it possible to activate willful creativity. Repeated willful efforts at creative search are generated in a person’s unconscious, based on his or her interest in the process of performing the task and in finding a rational outcome. It is impossible, as well as ineffective, to require of the task performer that he organize the workings of his unconscious and conscious mind as others think he should. The mechanisms of creative thinking are individual. It appears that when performing “open” tasks, neither the outcomes nor the tools for solution are set a priori. Consequently, the incentives for their performance also cannot be targeted either on the outcome or on the set of tools.
In the given case, the essence of incentivization can and must consist of activating the creative potential of the person performing the task (agent). In practice, this takes the form of creating conditions that enhance the value of performing the task in the eyes of the performer and make it easier to do the work of performing it.
Then, one of the effective components of the incentive for performing an “open” task is a resourceful search on the part of the performer and validation of it by the leadership as a major corporate goal.
In addition, another component of the incentive for performing an “open” task is an incentive for great organizational, financial, and administrative independence on the performer’s part in the process of task performance.
Finally, a third component is the material support of the performer in the process of task performance (it must be significant from the standpoint of its apprehension and very significant as regards the importance of the “open” task, should it be performed successfully).
It is evident from the aforesaid that:
- The incentive for performing an “open” task is complex, in contrast to the incentives for performing “closed” tasks, which can be simple or uncomplicated, for example, administrative or material in nature.
- The incentives for performing “open” tasks are not targeted outwardly with respect to the task performer, namely on the formal outcome, or the formal set of tools for performing “closed” tasks, but instead “within the performer him/herself,” to stimulate his/her creative activity both in searching for such tasks and in effectively performing them.
Incentives for energetic creative activity, in our view, can easily and appropriately be called COGNITIVE INCENTIVES.
Thus, on the basis of the proposed approach it is possible to distinguish three types of incentives for performing tasks involving risk, with regard to their focus on:
- a previously known outcome for the activity;
- a previously known set of instruments/tools for the activity, appropriate for tasks that may arise in the future;
- stimulation and support of creative activity of individuals in an organization seeking changes and development.
To illustrate the conclusions, we will present them in the form of a diagram (see Fig. 2).
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Fig. 2. Types of incentives for effective performance of risk-related tasks |
In conclusion, it seems essential to note that in the author’s view, the classification of types of incentives presented here, in terms of their focus, is fundamental and primary, as it precisely determines what is being incentivized. The manner of incentivization is extremely important, but still secondary.
A specifically directed (we will call it “vector”) incentive may have, from the standpoint of its content, various methods of influence: administrative, organizational, morale-based, material, etc.
The problems of the content of “vector” incentives lie beyond the scope of the present article. It can be noted only that for various categories of personnel, the content can and must be different.
© The U.S. Russia Center for Entrepreneurship
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