Money is Not a Bad Incentive for Energy Efficiency Behavior Change

Top business schools Harvard, Kellogg and University of Chicago have entire departments studying Organizational Behavior (OB).  Wharton even has an annual conference called OB.  The OB curriculums are cross-disciplinary, combining psychology, anthropology, economics and political science, as they consider how organizations work and how managers can best drive posititve change.

How money can be used as a motivational tool is a long-standing OB research topic.  While even healthcare firms consider how to pay people to take better care of themselves, McKinsey’s post crash research highlights that financial reward is less effective than providing employees the opportunity to lead and recognition by management for strong performance.

With ESG Visibility and Control, companies can use real energy use/cost data as the basis for both types of motivational tools, financial and non-financial.  The most significant energy efficiency behavior changes will come when companies integrate all of them, empowering managers with authority (lead), recognizing their impact (energy savings) and using the savings as a quantifiable financial incentive (financial reward).

Depending on the type of business we see a few different ways to make this happen:

In Manufacturing facilities:

We’ve already commented on how line managers can use ESG energy data from their production lines as a new metric – energy cost per unit of product produced.  These managers already have the authority and incentive to act, but have lacked the management system to enable them to make the best decisions.  Once given this new data, behavior change can be driven by the motivation to direclty impact their P&L, a very quantifiable and measurable metric.  Obviously managment incentives are regularly tied to P&L, coupling incentive to behavior change.

In Commercial Office buildings:

Office environment facility managers, responsible for a BMS controlling all HVAC and other major systems, typically have the capacity, but not the authority nor financial incentive to reduce energy consumption in their buildings.  These managers are trained to avoid any complaints by a building occupant – their implicit management metric is how few complaints they receive.

But they also know that by shutting down systems during low traffic or unoccupied periods they can save energy.   Simple activities such as turning off the escalators at night, alternating elevators, or dialing down the A/C when less that a dozen people are in the cafeteria can save real money.  These can even be programmed into the BMS schedule.  But these facility managers need the authority to act and to be relieved of the misleading complaint metric.

How about providing them instead a direct financial reward for taking these actions and a company green team sign saying “these escalators are off now, reducing our energy use by X annual kWh”?

In Retail Stores:

Many store managers already have direct incentive to manage floor sales teams using sales results as their measurable management metric.  Their activies are often geared around driving sales through effective promotions, the customer in-store experience and having the right products in stock.

By providing energy consumption and cost visibility tools to these store managers, a company can apply a new goal which, like sales, has a compensation impact.  During our research we’re learned of one large retailer who conducted energy usage competitions between stores posting results on the store’s backroom bulletin board.

In Distribution Centers:

By their very nature distribution centers are rarely occupied by large staffs.  While DC managers are in the position to understand their facility’s regular traffic patterns, they’ll now see how much can be saved by shutting down systems.  But they too need the management incentive to act.

With the right financial incentive, these managers can “micro-zone” their facilities, shutting down systems in low traffic areas, time-shifting fork lift charging stations, or reducing conditioning costs where dock doors are left open unnecessarily.

But in each of the above examples someone “higher up” needs to lead a new managment approach.  Authority and incentives get defined at the top – and that is where real Organizational Behavior change occurs.

via Money is Not a Bad Incentive for Energy Efficiency Behavior Change | Enterprise Smart Grid.