Category Archives: Article

Incentives & Disincentives: Will They Affect Performance?

11/1/2009 | Palmer, W., RILA Report

(Originally published in RILA Report – Asset Protection – Volume 3 – Issue 5, November 2009)

At this past May’s RILA Loss Prevention conference in Orlando, I presented a general session where we talked about the various performance “levers” that exist and how they can be used more effectively. There is a tendency for managers to push on the same one or two levers over and over again, even if they are not the ones that will have the most impact on performance.

In June’s column, we discussed task clarification in some further detail. In this month’s column, we’ll look at one of the most commonly used performance management techniques – incentives. We’ll also look at the intertwined issue of disincentives.

Incentives are such a strong part of management history that we have numerous idioms and sayings about them, such as “You can catch more flies with honey than vinegar” and the oft-used “carrot or the stick.” According to one study, over 75% of American corporations use some type of incentive scheme ranging from stock options to “Employee of the Month” awards to piecework pay for factory workers. In fact, they are so pervasive that we often take their effectiveness for granted.

As a result, when there is a performance gap in the workplace, we often turn first to the idea of providing incentives – a reward for the desired performance – or disincentives – a punishment if the desired performance is not achieved. However, there are many “levers” of performance and incentives will only work if the causal issue for the performance gap is related to motivation.

Here are some examples of when incentives will not be effective in changing performance:

 The employee does not have the capacity to perform the desired objective
 The employee does not have the knowledge or skill to perform
 The employee does not have the needed materials, tools, or resources
 When other incentives are more important than the one you are offering
 When disincentives outweigh the incentives offered
 When the incentives offered are not actually tied to the desired performance
 When the incentive scheme incorporates too many different performance objectives
 When the incentive scheme is so complicated that an employee cannot determine the link between their performance and obtainment of the reward

In fact, there is not even universal agreement that incentives actually work in the first place. Writing in the September-October 1993 issue of Harvard Business Review, author Alfie Kohn argues that, at best, reward programs produce temporary compliance. But, when it comes to productivity, he cites over two dozen studies that “have conclusively shown that people who expect to receive a reward for completing a task or for doing that task successfully simply do not perform as well as those who expect no reward at all.”

Additionally, poorly designed incentives can backfire and produce undesired results. In his book The Only Thing That Matters, Karl Albrecht describes watching an employee at a call center picking up a ringing phone and simply hanging it back up without talking to the caller. When asked about it, the employee said they were measured and rewarded on answering the phone within 3 rings.

Shortly after starting as the Director of Loss Prevention for a retailer a number of years ago, I inquired about the dramatic drop in check write-off losses for the current year versus the previous year. What I found is that the previous year’s write-off was the worst in company history and, as a result, the Senior Vice-President of Operations had sent out a memo to all management and all stores that this problem must be addressed and the financial results brought in line.

But, what we also found out was that check tender sales were way down and we were receiving a number of complaints from customers. It seems that many store management teams, in their effort to address the check write-off issue, were simply refusing to take checks unless they could call the bank to verify funds were available. At night, customers were sometimes being told, “If you have the money in your account, go to the ATM across the street and get the cash.”

You can imagine the impact these practices had on productivity, customer service, and, ultimately, on sales. Clearly, these were not the results the Operations head had intended.

Alternatively, Nicole DeHoratius and Ananth Raman published a study in 2007 that showed how changing a store manager’s incentive in a retail setting can affect their attention towards shrinkage and loss prevention. In the studied retailer, the company changed the emphasis of the store manager compensation plan to increase the weight given towards sales, thus decreasing the emphasis on the prevention of inventory shrinkage. As most of us might expect, the company saw an increase in both sales and shrinkage.

Clearly, I’m not arguing that there is no place for incentives in the workplace. Rather, when evaluating how you achieve desired performance, a careful analysis must be done that examines all the factors that influence performance. Simply dangling a “carrot” or threatening the “stick” in isolation will probably not produce the lasting results you desire.

As always, I welcome your comment, disagreement, and dialogue at.

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Originally published in RILA Report – Asset Protection – Volume 3 – Issue 5, November 2009

© 2008, Walter E. Palmer, PCG Solutions, Inc., All Rights Reserved

Training & Awareness: Do Your Employees Know What to Do?

6/1/2009 | Palmer, W., RILA Report

(Originally published in RILA Report – Asset Protection – Volume 3 – Issue 3, June 2009)

At the recent RILA conference in Orlando, I presented a general session where we talked about the various performance “levers” that exist and how they can be used more effectively. There is a tendency for managers to push on the same one or two levers over and over again, even if they are not the ones that will have the most impact on performance.

One of the first levers we discussed was task clarification. This simply means, “Do our employees know what we want them to do?” Now, this may seem like a silly question to you. You may be saying to yourself, “Well, of course they know what we want them to do!” But, I suspect we have all used task clarification on a regular basis.

For instance, have you ever been in a meeting where you have been discussing a performance issue and the resolution of the meeting was that someone said, “We’ll send out a memo on this!” That, my friends, is task clarification.

Task clarification can be very effective if the problem is, in fact, that employees are unclear on what you want them to do or don’t understand your performance expectations. However, one of the points in my presentation is that task clarification will have little impact if your employees already know what you want them to do but don’t have the incentives, the proper tools or systems, or the capacity to complete the task.

In this month’s column, I’d like to explore task clarification a little more closely and make sure that we use it in a way that is effective in changing the behavior of our employees. Isn’t that the goal of our training and awareness programs?

Effective task clarification has the following characteristics:

 It is specific to the task at-hand.
 It communicates to employees what you want them to actually do
 It identifies what model performance looks like
 It clearly communicates what is not acceptable

Let’s look at some of the training and awareness messages that companies use in terms of these four characteristics. For example, probably all of us have evangelized on the phrase, “The best deterrent to shoplifting is customer service.” This mantra has been communicated in training meetings, on posters, in videos, and on conference calls. Like many corporate mission statements, there is nothing there that you can argue with, but is it an effective training message?

Assuming an hourly associate gets that message, does it tell them what you want them to do? If they see a customer who looks “suspicious,” what are they supposed to do? If they see a woman stick a blouse in her purse, what are they supposed to do? If a customer comes out of the fitting room with fewer items than they entered with, what are they supposed to do?

And, just as importantly, especially in our business, what are they not supposed to do?

Here’s another example…many organizations have spent significant effort and time to get their employees to know their most recent shrink result and the goal for the current inventory period. Executives from the corporate office visit the store and ask employees, “Do you know your most recent inventory shrinkage number?” If the employee responds correctly, the executives are pleased, they tell the Store Manager and DLPM, “Great job!” and look forward to great results from the upcoming physical inventory.

But, is it possible that all those employees have committed the number to memory but have no idea what they are supposed to do to make the number lower? Is it possible that, left to their own, well-intentioned efforts, they might actually do things that you don’t want them to do?

When designing and implementing your training & awareness programs, focus on the behavior outcomes you want from your employees and make sure your communication has the four characteristics listed above and you stand a good chance to improving results.

As always, I welcome your comment, disagreement, and dialogue at .

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Originally published in RILA Report – Asset Protection – Volume 3 – Issue 3, June 2009

© 2009, Walter E. Palmer, PCG Solutions, Inc., All Rights Reserved

Fact or Fiction? Maintaining Credibility

4/1/2009 | Palmer, W., RILA Report

(Originally published in RILA Report – Asset Protection – Volume 3 – Issue 2, April 2009)

I was recently browsing various websites when one particular news ticker caught my eye. It reported that “The Top 10 in-demand jobs in 2010 did not exist in 2004.” Wow, that was a pretty shocking statistic! Ironically, I was reading the March edition of HR Magazine the very next day when I ran across an article titled “Where the Jobs Are.” The article included a sidebar “Top 10 ‘In-Demand’ Occupations.” Naturally, I was curious to see what these jobs are that did not exist in 2004. Here was the list:

1. Registered nurses
2. General and operations managers
3. Physicians and surgeons
4. Elementary school teachers
5. Accountants and auditors
6. Computer software engineers
7. Sales representatives and managers
8. Computer systems analysts
9. Management analysts
10. Secondary school teachers

Since this list was completely incompatible with what I had read the previous day, I decided to investigate. Since HR Magazine is produced by the highly respected Society for Human Resource Management, my first suspicion lay with the web news ticker information I saw.

A quick check via Google pointed me to the widely circulated “Did You Know?” video that has been viewed over 5 million times according to the “shifthappens” wikispace. In this video, it says, “According to former Secretary of Education Richard Riley, the top 10 jobs that will be in demand in 2010 didn’t exist in 2004.”

Since a couple of other “facts” from this video had also been featured on the original news ticker, it seemed logical that this was the source for the info. However, the conflict between this video and the SHRM list was not resolved. So, I went in search for the original comments from former Secretary of Education Richard Riley. It turns out that he did say this and was quoted in a book titled The Jobs Revolution: Changing How America Works. But, here is the important fact that solves the mystery – the book was published in 2004. If you go back and look at the quote, it now seems clear what has happened.

In 2004, Riley was making a prediction that he likely intended to make a point about how the pace of change would continue in the upcoming years. That is far different than reporting his prediction as a fact in 2009 when it has clearly not come true.

Now, I don’t think the owner of the original news ticker that I read was trying to mislead anyone. They simply picked up a widely circulated item and phrased it as a fact. But, it certainly would make me question the credibility of other facts that I read on that ticker in the future. Perhaps there is a lesson for all of us in this example.

We have talked in past columns about the importance of credibility, focusing primarily on expertise credibility and relationship credibility. But, this example reminds us of the importance of what I’ll call “factual credibility.” I use this term to differentiate it from a situation where someone is purposefully lying or being dishonest.

In our industry, we continue to see “statistics” cited in the popular press that are hard to substantiate. For instance, whenever we have gone through an economic downturn, my phone starts ringing with reporters from various news outlets that want to do a story on how an economic downturn results in either: a) increased employee theft; b) increased shoplifting; c) increased burglaries and robberies; or d) all of the above. They are usually disappointed that I will not endorse the concept carte blanche.

When I explain the nuances involved in statistically supporting the theory they are advancing, they grow bored and I can tell they simply want to call someone else who might be likely to enthusiastically agree to the premise. It may very well be that employee theft, for instance, goes up in times of economic difficulty, but given the fact that the seminal report in our industry has a lag time of many months in reporting estimates of employee theft, it seems hard to believe we could detect a statistically significant trend in a matter of weeks.

Yes, the theory sounds reasonable, but there is also a theory that during times of relatively high unemployment, employees are less likely to steal and they realize the ability to replace their current job with one of approximate quality is diminished.

Therefore, it is imperative on all of us to be careful in pronouncing theory, predictions, estimates, or guesses as fact. An example might be the dollar figures that are often cited relative to the total impact of organized retail crime in the U.S. There is no doubt that losses from ORC can be immense and that it is an issue that is worthy of our attention. However, before we cite a specific number for our industry as “fact,” let’s make sure we can support it and maintain our credibility, lest we lose our bully pulpit on any issue.

As always, I welcome your comment, disagreement, and dialogue at .

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Originally published in RILA Report – Asset Protection – Volume 3 – Issue 2, April 2009

© 2009, Walter E. Palmer, PCG Solutions, Inc., All Rights Reserved

Doing More with Less. Seriously?

Over the past few years, the mantra of “doing more with less” has been heard at virtually every Loss Prevention conference, in industry publications, and within the halls of corporate offices across the retail industry. Of course, what is usually meant by this is that we are not going to have the same levels of resources, funding, or people as in the past but we still need to deliver the same or, if taken literally, better results.

This article is not meant to criticize those who have used this phrase, but let’s take a look at this statement literally and see the implications of it. Perhaps, by breaking it down, it might help us as we negotiate these tough times and deal with the reduced levels of funding and personnel. In fact, before we even look at the concept of “doing more with less,” let’s look at “doing the same with less.” Many times, this is actually what is meant anyway.

Breaking Down How?

The inspiration for this article actually came to me a couple of weeks ago when I was flying home from a meeting. We were about 25 minutes late in pushing back from the gate when the pilot came on the public address system. He said that he still anticipated an on-time arrival as we would “try to make up some time en-route.” After thinking about this for a few minutes, I could only come up with three possible ways that could happen:

 We could fly faster

 We could fly a more direct route

 There was already time built into the original schedule to mitigate these types of delays

Those were the only possibilities I could come up with that would allow us to arrive on-time unless we flew to a closer destination, which was not an option on the table.

Doing the Same with Less

Let’s apply a similar analysis to the statement that we are going to “do the same with less” in the business environment. How is this possible? There are three possibilities that are analogous to the airplane example I just used:

 We are going to have our people work more hours (“fly faster”).

 We have discovered a more effective way to do the same work (“more direct route”).

 We had excess capacity previously (“extra time already built into the schedule”). In other words, we had people or resources that were not fully being utilized.

In looking at the above list, the first and last options are not particularly palatable to a senior executive as they suggest that they were not running their department very efficiently previously. Who wants to admit that they had some “fat” in the budget before?

The idea of finding a more effective way to accomplish the same work is probably the ideal goal of any executive in this position. However, it seems, at least most of the time, senior executives have a hard time articulating exactly what is being done more effectively.

The Reality

In reality, even though it does not match the definition of “doing the same with less,” this is what happens:

 We stop doing some things we were doing before.

This could be a little less of everything or a complete elimination of certain tasks. For instance, we could go from auditing every location three times each period to only twice per period. Or, we could audit the same number of times but not go as in-depth on each item and spend a little less time going over the results with the Store Manager. Each of these would be a way to do a “little less” than before in hopes that it won’t affect the desired results.

Another strategy would be to completely eliminate certain questions or audit points from the audit or stop conducting audits in low shrinkage locations. Again, the goal would be to eliminate certain low-value tasks in hopes that results are not impacted.

Achieving Desired Results

The point is that it’s probably unrealistic to think we are going to be able to “do the same with less” much less more. Therefore, if we want to achieve the desired results, it is imperative on the part of senior management to be engaged in deciding what tasks and responsibilities are eliminated or done less thoroughly. Otherwise, those decisions will be made – consciously or unconsciously – by each individual in the field who is trying to squeeze 80 hours of work into a 50 hour work week.

If that happens, you will have a tremendous amount of variance on what is actually being done in the field and when your results come in – good or bad – you will have a hard time evaluating whether to continue with current budget levels or not.

Alignment: Is it Time to Visit the Chiropractor?

2/1/2009 | Palmer, W., RILA

(Originally published in RILA Report – Asset Protection – Volume 3 – Issue 1, February 2009)

In last year’s columns, we started a dialogue on how to be more effective in getting the support of senior management for your programs, budgets, and proposals. We addressed:

  • Demonstrating a “Cause and Effect” Relationship
  • Speaking the Language of Senior Management
  • Knowing Their “Hot Buttons”
  • Establishing Expertise Credibility
  • Playing Nice in the Sandbox: Relationship Credibility

In this month’s column we are going to look at the issue of alignment. Fred Smith, Chairman of FEDEX, has said, “Alignment is the essence of management.” Alignment occurs in two dimensions. In horizontal alignment, we talk about how processes are aligned with customer needs. In vertical alignment, we talk about how people are aligned to an organization’s strategy. This is where we will focus in this column.

In their landmark book, The Power of Alignment, George Labovitz and Victor Rosansky have this to say about vertical alignment, “Vertical alignment is about the rapid deployment of business strategy that is manifested in the actions of the people at work. When vertical alignment is reached, employees understand organization-wide goals and their role in achieving them.” If we apply this to the Loss Prevention function, it means that we understand how our work supports the overall strategic goals of our organization. But, as importantly, it also means that others in the organization, including senior management, understand how we support the overall strategic goals.

In his article, “Not A Moment to Lose: Influencing Global Security One Community at a Time,” in the January/February 2009 issue of LossPrevention Magazine, Francis D’Addario identifies the need for alignment between loss prevention and the organization. “We must be conversant with the mission, values, and business objectives of our companies and interdependent service providers to affect ‘all hazards’ awareness and mitigation.”

Last year, Protiviti (www.protiviti.com), a global consulting and internal audit firm, conducted a survey aimed at assessing the differing priorities of executives and Loss Prevention management. Some of their findings were quite concerning. In their opening introduction, they summed it up as follows:

“Retailers appear to have a problem: Their loss prevention management is not always working towards the same goals as those of corporate executives. While the C-suite is developing an overall strategy that all departments in the retail organization – including loss prevention (LP) – are expected to follow, what they identify as being areas of concern may not necessarily align with the priorities of LP management.”

This conclusion leads to the question, “How can you possibly hope to get support for your programs if your senior management doesn’t believe your efforts align to the overall mission of the organization?” Since misery loves company, I will note that we are not the only staff function that faces this challenge.

For instance, the human resources profession, another staff function, faces the same challenge with several studies over the past few years showing the same disconnect between senior management and HR leadership.

This gap or disconnect could be caused by several factors. Some possibilities include:

  • We have not articulated our strategy and mission and how it connects to the overall strategic plan for our organization.
  • We have not communicated effectively with senior management to let them know our strategy and our progress towards goals.
  • We have not defined our mission in ways that are meaningful to senior management. For instance, perhaps we talk about case statistics without connecting them to shrinkage, lost productivity, out of stocks, etc.

There could be many more reasons for the gap. What are your thoughts? Do you think you and your senior management team are aligned in priorities and strategies? If so, how do you accomplish that in your company? Please share your successes or challenges. We are always receptive to feedback from the “real world.” You can contact us at our contact page.

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Originally published in RILA Report – Asset Protection – Volume 3 – Issue 1, February 2009

© 2009, Walter E. Palmer, PCG Solutions, Inc., All Rights Reserved