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How one company radically changed its
incentives using behavioral science
James Brewer – Eli Lilly Co
Kurt Nelson, PhD – L...
But our reward and recognition
system had not
We wanted to use the latest
behavioral science
to drive the
process
We asked 4 Questions
1. What was the strategic intent
2. How did it impact motivation
3. How was behavior impacted
4. Cost...
The Four Drive Model of
Employee Motivation
Lawrence & Nohria, 2002
Acquire & Achieve
Driven to acquire things,
money, status, rewards and
resources
Bond & Belong
Driven to create positive
r...
ORGANIZATIONAL CHANGE
doesn’t happen without
BEHAVIOR CHANGE
BEHAVIOR CHANGE
happens when
MOTIVATION CHANGES
ENVIRONMENT CHANGES
SOCIAL CONNECTIONS CHANGE
or EMOTIONS CHANGE
MOTIVATION CHANGES
happens when
YOUR ATTITUDE CHANGES
EXTRINSIC REWARDS CHANGE
or INTRINSIC DRIVES ARE
TAPPED INTO
Acquire & Achieve
Driven to acquire things,
money, status, rewards and
resources
Bond & Belong
Driven to create positive
r...
What we found out
Mostly focused on satisfying the drive to Acquire & Achieve
Inhibiting drive to Bond & Belong and patien...
Revamped our reward &
recognition framework
R&R
Components
Customer
Business
Service
Value
Chain
Incentive
Compensation
R&R
Components
Incentive
Compensation
Other
Recognition
Non-CashTrips
Using behavioral science to design
Behavioral Economic Principles
Hedonic motivation – hedonic (luxurious) awards are more
motivating than equivalent cash or...
Behavioral Economic Principles
Perceived Fairness – people are highly influenced by a sense of
fairness (or really perceiv...
20
Monkey Business
If less than $3 shared – most reject offer
Frans deWall
Behavioral Economic Principles
Idiosyncratic fit – When we feel we have a unique advantage in a
program or that a program ...
Goal gradient theory – Goal motivation increases as people move
closer to target. The closer you get to the target, the gr...
How we applied
Incentive Design
 Team based incentive
 Focus on fairness
 Customize to individuals
 Anchor desired per...
Using behavioral science to communicate
Behavioral Economic Principles
Percent that registered before deadline
Framing – People react differently to a particular ...
Behavioral Economic Principles
Social proof (the bandwagon effect) – Tendency of people to
assume the actions of others re...
Behavioral Science Principles
Cognitive Overload – Our short-term memory can only process a
limited amount of information....
How we applied
Incentive Communication
 Used campaign approach
 Graphically enhanced to clarify and drive behaviors
 Fr...
How we are using behavioral science today?
Rewards & Recognition
Fleet Safety
Patient Adherence
Manager Training
Sales Ope...
Thankyou!
James Brewer
Brewer_james_a@lilly.com
Kurt Nelson, PhD.
kurt@lanterngroup.com
www.linkedin.com/in/kurtwnelson
ww...
World at Work Total Rewards 2017 presentation - lantern group - behavioral science
World at Work Total Rewards 2017 presentation - lantern group - behavioral science
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World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 1 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 2 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 3 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 4 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 5 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 6 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 7 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 8 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 9 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 10 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 11 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 12 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 13 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 14 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 15 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 16 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 17 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 18 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 19 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 20 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 21 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 22 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 23 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 24 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 25 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 26 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 27 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 28 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 29 World at Work Total Rewards 2017 presentation - lantern group - behavioral science Slide 30
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World at Work Total Rewards 2017 presentation - lantern group - behavioral science

Our presentation from the 2017 Total Rewards session that showed how we used behavioral science to change the incentive and total reward framework for Lilly.

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World at Work Total Rewards 2017 presentation - lantern group - behavioral science

  1. 1. How one company radically changed its incentives using behavioral science James Brewer – Eli Lilly Co Kurt Nelson, PhD – Lantern Group
  2. 2. But our reward and recognition system had not
  3. 3. We wanted to use the latest behavioral science to drive the process
  4. 4. We asked 4 Questions 1. What was the strategic intent 2. How did it impact motivation 3. How was behavior impacted 4. Cost of the program
  5. 5. The Four Drive Model of Employee Motivation Lawrence & Nohria, 2002
  6. 6. Acquire & Achieve Driven to acquire things, money, status, rewards and resources Bond & Belong Driven to create positive relationships, engage with others and “fit in” Create & Challenge Driven to create, improve, master, learn and overcome challenges Define & Defend Driven to define our beliefs and purpose and defend our status, ideas, relationships and “tribes” 4-Drive Model
  7. 7. ORGANIZATIONAL CHANGE doesn’t happen without BEHAVIOR CHANGE
  8. 8. BEHAVIOR CHANGE happens when MOTIVATION CHANGES ENVIRONMENT CHANGES SOCIAL CONNECTIONS CHANGE or EMOTIONS CHANGE
  9. 9. MOTIVATION CHANGES happens when YOUR ATTITUDE CHANGES EXTRINSIC REWARDS CHANGE or INTRINSIC DRIVES ARE TAPPED INTO
  10. 10. Acquire & Achieve Driven to acquire things, money, status, rewards and resources Bond & Belong Driven to create positive relationships, engage with others and “fit in” Create & Challenge Driven to create, improve, master, learn and overcome challenges Define & Defend Driven to define our purpose and defend our status, ideas, relationships and OUR “tribes” 4-Drive Model
  11. 11. What we found out Mostly focused on satisfying the drive to Acquire & Achieve Inhibiting drive to Bond & Belong and patient focus Not leveraging behavioral principles: • Hedonic Motivation • Perceived unfairness • Idiosyncratic Fit Not leveraging communication aspects: • Framing • Social proof • Cognitive load
  12. 12. Revamped our reward & recognition framework
  13. 13. R&R Components Customer Business Service Value Chain Incentive Compensation
  14. 14. R&R Components Incentive Compensation Other Recognition Non-CashTrips
  15. 15. Using behavioral science to design
  16. 16. Behavioral Economic Principles Hedonic motivation – hedonic (luxurious) awards are more motivating than equivalent cash or other rewards. These types of awards do not result in “indulgence guilt”, fulfill our desire for pleasure, and are perceived as more valuable than their economic cost.
  17. 17. Behavioral Economic Principles Perceived Fairness – people are highly influenced by a sense of fairness (or really perceived lack of fairness). This impacts both behavior and attitude. “Fairness seems a bit like air – its absence is a lot more noticeable than its presence.” Mathew Liebermann, PhD Research: Ultimatum Game – 2 players split $10. One person makes offer of split, the other decides yes or no to accept. How much do you usually have offer for the 2nd person to accept? ≥$3
  18. 18. 20 Monkey Business If less than $3 shared – most reject offer Frans deWall
  19. 19. Behavioral Economic Principles Idiosyncratic fit – When we feel we have a unique advantage in a program or that a program is tailored specifically to us we are more motivated. This sense of unique fit to us fuels our desire to perform – even if the requirements to achieve success are more difficult. Low cost entry fee MeanJoiningLikelihood(0-10) 6 5 4 3 2 High cost entry fee Likelihood of Joining Credit Card Program Ran Kivetz
  20. 20. Goal gradient theory – Goal motivation increases as people move closer to target. The closer you get to the target, the greater the motivation is to achieve it. Behavioral Economic Principles Research: Buy 10 coffees – get one free! 10 coffee punch card Average 15.6 days 12 coffee punch card with 2 pre-punched Average 12.7 days Ran Kivetz, 2006 Illusionary goal progress – Goal motivation increases even when the progress towards the goal is illusionary. Buy 10 get 1 free FREE X X Buy 12 get 1 free FREE
  21. 21. How we applied Incentive Design  Team based incentive  Focus on fairness  Customize to individuals  Anchor desired performance  Enhance with hedonic motivators
  22. 22. Using behavioral science to communicate
  23. 23. Behavioral Economic Principles Percent that registered before deadline Framing – People react differently to a particular choice or option based on how it is presented (e.g., loss or gain, certainty or uncertain, etc…). Penalty 93% 67% Discount Research: Framing of early registration discount as a penalty or discount?
  24. 24. Behavioral Economic Principles Social proof (the bandwagon effect) – Tendency of people to assume the actions of others reflect the correct behavior in a given situation. People are more likely to take action or behave in a specific manner if they see others doing the same thing. A B C Research: Which line matches the test line? 75% of participants conformed to the majority view at least once, even when it was clearly incorrect. Solomon Asch Test Line
  25. 25. Behavioral Science Principles Cognitive Overload – Our short-term memory can only process a limited amount of information. Too much information in too short of period results in information being discarded and memory/processing shutting down. Research: How information is presented can have significant impact on comprehension, processing and retention. Before – 32% retention of key data items After – 67% retention of key data items
  26. 26. How we applied Incentive Communication  Used campaign approach  Graphically enhanced to clarify and drive behaviors  Framing of communications accordingly  Normative vs. Descriptive  Present vs. Future  Use testimonials/numbers to drive social proof  Communicated desired performance to anchor it in
  27. 27. How we are using behavioral science today? Rewards & Recognition Fleet Safety Patient Adherence Manager Training Sales Operations
  28. 28. Thankyou! James Brewer Brewer_james_a@lilly.com Kurt Nelson, PhD. kurt@lanterngroup.com www.linkedin.com/in/kurtwnelson www.linkedin.com/in/jamesabrewer1
  • VeraMyleneLopezLoren

    Mar. 7, 2018
  • ivytsang503

    Aug. 23, 2017
  • bashua

    Jul. 14, 2017

Our presentation from the 2017 Total Rewards session that showed how we used behavioral science to change the incentive and total reward framework for Lilly.

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