Rob Alvarez
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The Same Bonus Can Motivate Your Team, or Wreck It | Episode 455

Listen on SpotifyListen on Apple PodcastsAvailable on YouTube Real cases pulled apart through the Octalysis Core Drives, sent to your inbox over a few days. Get the free guide: professorgame.com/WildCD

Episode Summary

Rob breaks down why the same reward can pull a team forward or quietly wreck it, using three cases where the design decided the outcome. He walks through a school in Caracas where escalating fines for late pickups made lateness worse, the sales bonus patterns that produce burnout and sandbagging, and The Octalysis Group’s project with Procter & Gamble’s distributor Navo Orbico, where a gamified ship upgrade tightened the feedback loop instead of paying for the sale. Along the way he separates two mechanisms that often get treated as one: a fine turning a moral obligation into a price, and the over-justification effect crowding out intrinsic motivation on the reward side. Listeners learn how to match the reward to the job it actually has to do, and when to hand off to something more durable.

About the Host

Rob Alvarez is Head of Engagement Strategy, Europe at The Octalysis Group (TOG), a leading gamification and behavioral design consultancy. A globally recognized gamification strategist and TEDx speaker, he founded and hosts Professor Game, the #1 gamification podcast, and has interviewed hundreds of global experts. He designs evidence-based engagement systems that drive motivation, loyalty, and results, and teaches LEGO® SERIOUS PLAY® and gamification at top institutions including IE Business School, EFMD, and EBS University across Europe, the Americas, and Asia.

Key Takeaways

  • A school in Caracas replaced the moral weight of collecting your child on time with an escalating fine, and lateness went up instead of down. Core Drive 5 (Social Influence and Relatedness) stopped doing its job the moment the delay carried a price.
  • Gneezy and Rustichini’s study “A Fine is a Price” documents the same reversal in day-care centers: a monetary fine (Core Drive 8, Loss & Avoidance) for late pickups increased late pickups, and removing the fine did not bring them back down.
  • A standing sales commission with nothing behind it pays for the behavior forever. Reps chase the next check to make ends meet, and with no other motivation in the system, the commission burns them out rather than building anything durable.
  • Capped bonuses fail in two directions. Targets set too high get read as unreachable, so reps stop trying, and reachable targets get sandbagged, with closed-ready deals held into the next cycle so the company waits on revenue it wanted today.
  • In The Octalysis Group’s project with Procter & Gamble’s distributor Navo Orbico, ship upgrades inside Masters of the Endless Seas cut the roughly week-long CRM lag on seeing whether a sale landed, tightening the Core Drive 2 (Development and Accomplishment) loop instead of paying for the sale. Rob was not on the project team and saw it presented at Brighton.
  • Nearly every reward failure is one of two mistakes: treating the get-them-through-the-door reward as the whole engine, or bolting an extrinsic reward onto behavior that already had an intrinsic reason, which is where the over-justification effect crowds that reason out.

Topics Covered

  • 0:00 — The reward is a tool, not a motivator
  • 1:56 — The Caracas school that fined late parents
  • 2:45 — How a fine replaced a moral obligation
  • 4:07 — A Fine is a Price, Gneezy and Rustichini
  • 4:44 — When rewards do an honest job
  • 6:07 — Standing commissions and sales rep burnout
  • 7:07 — Bonus targets set too high to chase
  • 8:06 — Hitting the number, then sandbagging deals
  • 8:52 — The over-justification effect in action
  • 9:27 — P&G’s Masters of the Endless Seas
  • 11:15 — Why the ship worked when the bonus failed
  • 12:20 — Choosing the reward that fits the job

Mentioned in This Episode

Free Resources and Get in Touch

Looking forward to reading or hearing from you, Rob Full episode transcription (AI Generated)

The reward is a tool, not a motivator

Rob Alvarez (0:00): Have you ever found yourself handing your team bonuses, rewards, even though what you actually wanted was genuine, lasting engagement and loyalty? But it’s just not landing. It’s because a reward is a tool, and most people reach for the wrong one for the job you want done. Rob Alvarez (0:18): Here’s the thing. Most people treat rewards as something that is universally good, and you can just bolt onto something and solve your problem. Heck, I used to do that not so long ago. But the thing is that rewards isn’t just one thing that you can say, rewards are good, rewards are bad. Once you start understanding how rewards actually work, you’re able to really stop misusing it. Rob Alvarez (0:43): By the way, I’m Rob. I’m Head of Engagement Strategy at The Octalysis Group, where we design exactly these systems that turn rewards into something that really works for what you want them to work. And I’m also the host and the founder at the Professor Game podcast. I’ve watched these rewards land very, very well, do fantastic jobs. And of course, I’ve seen them land very badly across a lot of real projects. Rob Alvarez (1:08): And I can promise you that I’m not going to give you a very tidy and neat list of where yes and where no, because rewards are messier, they’re more complicated than that. I’ll give you real cases. Cases where the reward was the right tool for the job, and the moments when the reward or the punishment was exactly the opposite of what was needed. It was a complete misfire. And the one question that you want to ask before you hand out any rewards. Rob Alvarez (1:40): And before we get into all of these cases, if these are the kinds of things you want to use to solve your real product or team problems, please go to the link below and find our guide Core Drives in the Wild, where you’ll be getting real cases like this one analyzed through the lens of the Octalysis Core Drives.

The Caracas school that fined late parents

Rob Alvarez (1:56): I know of this school back home in Caracas that had this very, very real problem. Parents kept picking up their kids well beyond just being a little late. Sometimes it was one hour, two hours, or many hours. It got so bad that there was this kid that almost ended up sleeping in the school with the people who were just basically in charge of keeping the school safe and clean. Rob Alvarez (2:21): So, what do you do when you have a problem? You look for a solution. And they went for something that sounded pretty obvious: a fine. The fine escalated as long as you became more and more late. The issue is that lateness actually went up after they implemented fines. The fines made the problem actually get worse.

How a fine replaced a moral obligation

Rob Alvarez (2:45): But Rob, if people are fined for a bad behavior, why do they do it more? Well, here’s the thing. In this case, people were trying not to be late, even when they actually got to be late, because it was a moral obligation. You felt bad. Core Drive 5 (Social Influence and Relatedness) was telling you you don’t want to do the wrong thing in front of all these people. You want to behave the right way. And even when you failed at it, you felt bad about this thing. Rob Alvarez (3:14): When you turn that around and make it into a fine, which by the way can be cheap enough so that families can run the number, which is what these families probably did, run the numbers and say, well, this is actually a cheap babysitter for situations where I cannot escape a meeting, I cannot leave early today, or whatever other situation there was. They made the numbers, they turned a moral obligation into a transaction that they could easily calculate. Rob Alvarez (3:43): And the problem is that when you remove the moral obligation by turning it into a fine, there is no more moral obligation. You stop caring about that. And you say, well, now this is a service that I am paying for. Before, being late was a mistake. Now they were estimating whether it was worth it or not worth it to be late to pick up their kids.

A Fine is a Price, Gneezy and Rustichini

Rob Alvarez (4:07): And there’s actually even a study called “A Fine is a Price”, by, and please don’t kill me for butchering the names of the authors, Gneezy and Rustichini, I think is exactly the name, but I’m probably butchering the way to pronounce their names. So make sure that when you’re introducing these rewards or penalties in this case, they are doing the right job that you want them to do. So are your penalties or rewards turning what was a moral obligation into a calculation, a transaction? Something you decide whether it is worth it or not.

When rewards do an honest job

Rob Alvarez (4:44): But hey, I’m not here to chastise rewards. Rewards can actually be very, very useful, both intrinsic and extrinsic rewards, because they become part of the motivation. Sometimes, in fact, there is no intrinsic motivation to get the job started because it’s something people have never done before. The person has never done this thing. You cannot amplify with rewards an intrinsic motivation for something they have never done before. Rob Alvarez (5:12): So it can have a very real, very honest job. You can purchase, you can do this transaction thing that I mentioned before to get the action going. So something really has a chance to grow into an intrinsic motivation for people if you do it the right way. Rob Alvarez (5:26): But here’s the catch: the problem is if the reward was only meant to get people started, you have to build something that is also more durable. Or you’re basically stuck paying people for the behavior forever. And you know, maybe you have the cash for that, but usually companies are not very willing to constantly pay for that behavior. Well, of course, employees, you pay for a salary, but I’m talking well beyond the salary, or even their customers. You can pay with a promotion, you can pay with something to get them started, but then you want to build something that is more durable. Rob Alvarez (5:58): So rewards there have a place if you know how to introduce them and when, and especially when to pull back those rewards.

Standing commissions and sales rep burnout

Rob Alvarez (6:07): And here’s another misfire that I see very, very frequently. Actually, I think it’s one of the ones that I see the most, and this is very typical from sales organizations. You talk about sales bonuses. Everyone uses it. To a certain extent, they work, especially in the early days. Rob Alvarez (6:23): But you can also see them doing the wrong job. Standing commission, nothing else, always chasing the next check. If you are constantly trying to make ends meet at the end of the month by getting another commission, another commission, it’s more and more and more and more. It sort of never ends in a way. If there is nothing else beyond that motivation, you eventually burn people out. Rob Alvarez (6:49): Because it’s a bit too much. You get a commission, it gets a better job done, to be honest. We’re going to compare it to bonuses as well. It oftentimes gets a better job done if the commission is fair and it gets people in the right place. The problem is it doesn’t have an end. And if there’s nothing else other than that, it doesn’t really work. It just burns you out.

Bonus targets set too high to chase

Rob Alvarez (7:07): When you do bonuses, on the other hand, there’s sort of two alternatives that teams usually run into. It’s capped, right? You set it too high, you say, well, if you get it to this level, you’ll get all of your bonus. If you get it less, you get a percentage of that bonus, for example. But the problem is that you land in two places. Rob Alvarez (7:28): It’s either set too high, right? And people say, well, I can’t really hit that. There’s no way I’m going to make it to that place. So even worse, if the bonus is have it or not have it, if it’s binary, then it’s I’m never going to hit it. So why even try? It doesn’t matter. It’s not going to make any difference. Rob Alvarez (7:45): That’s very bad. But even in the intermediate, you say, well, you know, the goal is so high that I’m never going to reach it. So oftentimes people get, frankly, eventually demotivated because they say, well, it’s just too far away. I’m never going to make it. But there’s other times when, even when it’s not easy, but it’s still achievable, you run into a very serious issue.

Hitting the number, then sandbagging deals

Rob Alvarez (8:06): When people actually get to hit that milestone, they stop dead entirely. Or they can also sandbag. Sandbag is holding deals so that they happen in the next cycle. So that they can use that deal to push them for the next bonus on the next cycle. Rob Alvarez (8:26): None of these things is actually serving the business ideas that you were trying to push. That rep is now delaying revenue that the company wants today to protect their individual bonus. So the bonus that you put there to incentivize people to make the deal is actually stopping them from making the deal. So the reward became the reason for making deals, but then it essentially got gamed.

The over-justification effect in action

Rob Alvarez (8:52): Here we can see the over-justification effect in action. You are rewarding people specifically with something completely extrinsic, and it is crowding out the intrinsic motivation they might have had to do the deal because it was for the good of the company. So it could be Core Drive 1 (Epic Meaning and Calling), because they can use all these strategies. So Core Drive 3 as well. The thing is you are using this very extrinsic thing and it’s crowding out everything else. So if it’s not used well, it turns into the over-justification effect, which has been very, very widely studied out there.

P&G’s Masters of the Endless Seas

Rob Alvarez (9:27): So I already mentioned that I don’t just want to talk about the misfires and the ways this can go wrong. I already mentioned one of the ways that rewards can be used positively. And I want to put you in a case where it was not just used positively, but also successfully in a project from The Octalysis Group. I was not present in the project, but I did see it being presented for the first time back in Brighton. I already talked about this in the previous episode, which you can find in the show notes. Rob Alvarez (9:49): And I’ve also been researching into this, looking at the numbers and what are the results, because part of my job is to talk with clients about what we can do with them. And during our actual projects, we do use a lot of our past knowledge from what has worked in the past. Rob Alvarez (10:08): So, same world. Let’s stay with sales reps. A completely different result with the reward. Inside a gamified world that was created by The Octalysis Group with Procter & Gamble. Reps, in this case, of course, they still had their sales commissions and they had all of that side, which was not at the core of the design. Rob Alvarez (10:27): In this case, what the gamified system was doing was allowing them to upgrade their ships. I don’t know if you remember from the episode, this was the Masters of the Endless Seas. That was the whole overarching theme, and they were building something together. Rob Alvarez (10:46): What this actually represented in their real life outside of the gamified system, because of course, if this was only, you get a nicer ship, it’s nice, but it does not have really that reward component. In the existing CRM, the way it was already working, getting to see if the sale actually happened, the results, and being reflected to your bonus, amongst other things, it took about a week or maybe a little bit more to be reflected. The upgrade of your ship started to cut down on that lag. You were able to see your results faster.

Why the ship worked when the bonus failed

Rob Alvarez (11:15): Why did the ship work when the bonus failed? It never became the reason itself to sell. And there was nothing to game. You were not gaming anything. Faster feedback was tightening the accomplishment loop of Core Drive 2 (Development and Accomplishment). And it sharpened you acting on fresh information so that you could execute on Core Drive 3 (Empowerment of Creativity and Feedback). It made the work itself better. Rob Alvarez (11:43): In this case, you were boosting the actions that the seller was already doing so that they could do them better. It gave them better tools to do the actions that they were completing. It was not an external reward just feeding in so that you would say, I’m going to do this because it is worth it for the reward. Rob Alvarez (12:03): Same kind of tool as the bonus. Completely opposite outcome. The difference was in how it was designed and how it was implemented through the lens of really understanding behavioral science so that the behavioral design could really be there.

Choosing the reward that fits the job

Rob Alvarez (12:20): So let’s take a step back for a second. Nearly every reward failure is one of these two mistakes. Using the get them through the door reward as if it was the whole engine. So, yes, it got the first action. The problem is nothing durable was ever built after that. So you essentially are paying them for the behavior forever. That is what the standing commission with nothing behind it is actually doing. Rob Alvarez (12:45): Or you’re using a reward onto something that already has an intrinsic reason. And then you’re going to watch how this extrinsic reward is replacing the intrinsic reason. That is what the fine was doing. That’s a sales bonus also gone wrong. Rob Alvarez (13:03): It was never about use rewards or don’t use rewards. It’s reading what the job, what the moment really needs. And choosing the real reward that is going to do that job. And also when and how to hand it off to something that is different than that extrinsic reward that you’re handing out. Rob Alvarez (13:25): Don’t get me wrong, this is not easy. This is hard because the same bonus, the same team can pull people in, burn them out, get gamed, depending entirely on the design and what, how, and when you’re handing it off to something else. It’s easy to grasp, but it takes years to master. A reward isn’t a motivator you bolt on and that’s it. It’s a tool with lots of jobs. And your whole skill is knowing which job you actually need. Rob Alvarez (13:54): So if you want to dive deeper, go further in looking at real cases through the lens of the Octalysis Core Drives, I invite you to click on the link below on the description where you can sign up and get a daily email for a few days where I’m going to show you real cases in my own consultant opinion about how the Core Drives are being applied in each of those cases. And at least for now and for today, it is time to say that it’s game over. End of transcription

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