WHY SO MANY INCENTIVE PROGRAMMES FAIL
June 2, 2014 Leave a comment
“Outstanding performance is not a skill; it’s a commitment and an attitude.”
I had a discussion a few days ago with a newly appointed manager about the “trip for performance” culture in his company for top performing salesmen, as he felt that they didn’t actually seem to achieve their goal of driving the required behaviour, nor did they actually seem to enthuse the winners with a great feeling of having been well rewarded for their achievements. He therefore felt that as the new incoming manager he needed to rethink the incentive programmes in a way that they could actually be more effective, and he was therefore seeking my advice.
His description of the latest incentive trip made me realise that he was right about their minimal usefulness, as the majority of award winners were the traditionally high-performing, high-earning salespeople, who would have overachieved against their goals anyway as a natural outcome of their normal behaviour. Beyond this, the trip that they were about to embark on as their reward for outstanding performance was at a level that would not have seemed much of a reward. It basically comprised a 4-night long weekend trip to Las Vegas from London, travelling economy, without partners, and staying in a mid-level hotel … all done on a shoestring. He rightly pointed out (as one of the award winners) that taking him away from his family for a long weekend was actually a disincentive, as he generally struggled to find time to spend with them anyway, just from coping with the demands of the job.
It initiated a long discussion of what should be the characteristics of an effective incentive programme. Here are some of my criteria for success.
– It needs to be more than just for salespeople … I have rarely come across a company where salespeople can be successful on their own, without the support of various groups of people around them. Having incentive programmes that incentivise and reward only the sales part of the effort can create resentment and disillusionment in the rest of the organisation. The most popular winner of one of my President Clubs was the Headquarters receptionist/telephonist, who was the “face to the customer” and who was a consummate professional. Rewarding excellence should include an opportunity for all to participate.
– It needs to deliver an opportunity for success to more than just the top 10% … The top-10% of salespeople will work to over-deliver on their goals anyway, whether driven by their personal need to succeed or their drive for financial reward. A truly successful incentive program will work towards incentivising the next 10-20% as well towards striving for inclusion in the programme rewards. There is no incentive that works better than starting with hope.
– It needs to be achievable, but with real effort … Having an incentive programme where it is too easy to reach the milestones will not deliver much in terms of benefits and will not deliver a sense of achievement to the award winners. Having a programme where it is almost impossible to achieve the goals will mean that people will give up before they even start. A worthwhile incentive programme needs to give everyone the belief that they have the ability to be an achiever, but only by putting in the commensurate effort to do so.
– It needs to be easily understood by all … I am always amazed that no matter how complex is a commission scheme, even the most simple salesmen will be able to calculate their commission due on a deal down to the closest centime/cent/penny. However, incentive programmes need to make it easy for everyone, as the last thing you want is to encourage totally inconsistent behaviour that would be needed to achieve the results.
– It needs to be well rolled out with some fanfare … If the incentive programme is to be considered important by the participants, it should be rolled out with some pomp and ceremony, which just sending out an “email cc: all” doesn’t achieve. One programme that was available to me early in my career involved a trip to Hawaii. After the initial rollout which took place at the airport, we all kept receiving little Hawaiian reminders at about monthly intervals … a lei, a sun-hat, a bottle of Hawaiian tanning lotion etc., … they just kept coming and gave the programme some impetus over time.
– It needs to have a reward worth winning … Having a few days in Las Vegas on a shoestring is not worth the effort beyond being tagged as an achiever, particularly when the reward entails you sharing it only with people you spend your working time with anyway, but making you leave your partner/family at home during personal time. The reward also needs to be geared to the role, as what will excite a salesman will not necessarily excite a consultant or someone in Accounts Receivable. It doesn’t have to be an expensive prize, but it does need to be worthwhile. One of the most successful incentive programmes I ever ran involved a Rolls Royce hubcap mounted on a wooden plaque, mainly because it was a dig at the company car scheme at that time.
– It needs to be a reward that winners would not normally do or acquire … the cost of the incentive reward is less relevant than its uniqueness. A 4-day trip to Las Vegas for people living in London is somewhat ho-hum, particularly if done on the cheap, as the award winners in this case were by definition the highest commission earning salesmen, who could have afforded to do it themselves, and probably at a better level of comfort. I suggested that a pampered weekend at London’s Connaught or Dorchester Hotels for winners and partners would be a greater reward (and less expensive) as it was something that people who actually lived in London would be unlikely to do themselves.
– It needs to be true recognition for excellence amongst peers and partners … I have always found that the best incentive programmes ensured that recognition was visible to the personal ecosystem of the award winners. Recognising excellence in front of, and shared with, an achiever’s partner, who generally has to also shoulder some of the burden, is as important as peer recognition, whether it is awarded at a company in-house event or an awards dinner. This truth came home to me at an awards dinner early on in my career, when I heard a spouse say to her husband “Don’t embarrass me next year by not getting up on that stage.”
As 16th President of the US Abraham Lincoln said “A goal properly set is halfway reached”.