The Correct Carrot

What motivates salespeople? That depends on the salespeople. According to motivation expert Bob Nelson, great motivators begin with a process.

“My preference is to start with a process: talking with those you are trying to motivate and finding out what is important to them, allowing for a much broader range of potential motivators,” explains Nelson, a guru of work rewards. “It’s not an either-or proposition. The ideal is cash plus product plus individual goal setting. Motivation is a moving target.”

Travel Takes Them Higher
Money doesn’t motivate – at least not on its own, says George Kling, an incentive and premium marketing consultant. But money buys things that motivate, namely merchandise and travel. “Product incentives work because they represent the things that people would like to have but will not necessarily spend out-of-pocket cash for because that cash is used for necessary things.”

Kling, president of Potential Profits Group in Branford, CT, believes unwaveringly in product incentives. Here are some reasons why: Potential qualifiers can focus on merchandise and travel, but not cash. Employees usually can pick from an array of product choices. Products deliver opportunity for recognition, trophy value and lasting reminders. “Merchandise will be bragged about and they can talk about having earned it,” Kling says. “We have Revere Ware pots and pans in our household that I earned 50 years ago. I remember where we got them.” For the manager, products stretch a budget further. Companies buy watches wholesale. The perceived value of merchandise surpasses the face value of an equivalent amount of cash, but “it costs you $100 to give an employee $100.”

Corporate America spends $23 billion a year on incentives, with about 25 percent of it intended to inspire salespeople. As an incentive, cash still dominates. But the minuses of money abound, Kling says. “People don’t remember why they got it. People say they tend to squander the cash or use it to pay bills.” He adds, “Cash rewards become considered as entitlement. Once cash is given, if it isn’t continued it looks like a drop in their income rather than not earning a reward for doing something outstanding.”

For 30 years Kling has helped corporations sell to the incentive market. His clients include such household names as AT&T, Eveready Battery and Gillette. Cash won’t inspire the top sales reps who market the products made by Kling’s clients; neither will the upscale merchandise that these reps sell, says Kling. But trips to Hong Kong, Hawaii, Aruba or Portugal have motivated them to exceed quotas. “We could have just given them each a ticket and hotel reservations, but they’d have a problem deciding when they could afford to go. By making it a group event, all kinds of things entered into it. Dates were absolute. Peer pressure was rampant. Travel to exotic places became looked forward to on an annual basis.”

A Portfolio of Rewards
Thomas B. Wilson, a compensation consultant and president of the Wilson Group Inc. in Maynard, MA, prefers a blend of rewards to bring out the best in people and their organizations. “Imagine an environment that makes people feel valued versus a place that just pays out incentives or gives out stuff on a periodic basis,” says Wilson, author of Rewards That Drive High Performance (AMACOM, 1999). “I love having conversations with people who say, ‘I love my job and I feel appreciated.'”

But Wilson has seen trouble with real-life cash-award practices. He suggests a couple to-dos: Closely tie money rewards to performance – or employees will come to expect the award. Second, keep things simple. That way, people understand what they need to do. Of course, the cash must buy something meaningful, or the reward lacks staying power.

Merchandise and other products better inspire memorable delivery. “Companies give out bonus checks generally through direct deposit and with little celebration,” Wilson says. “People fail to take the time to emphasize accomplishments and say what’s important to the company and its customers. The celebration is where the real value is. Use the opportunity. You have to have pizzazz and impact. Products do something that anchors the memory of the achievement. It gives bragging rights.”

Delivery aside though, products can pack a powerful punch in another way. A manager can personalize a reward as a special thank-you to a top performer, Wilson explains. Does the employee love mystery books? Go to the trouble of getting a signed copy of a popular mystery writer’s latest release. “Take merchandise and make it personal – say, ‘I know about you and care about you. You’re important. Stay with us. We’ll give you an extra 50 percent of your salary, but here’s something else to reinforce the message that we appreciate you.'”

On the downside of some product incentive programs, Wilson dislikes putting a cap on the number of awards doled out to top achievers. Instead of a close-ended campaign that undermines teamwork, he prefers more inclusive efforts that encourage everyone to reach a goal – and win.

In case after case, Wilson has seen evidence that it takes a portfolio of rewards to cover all the bases. Some people can collect cash incentives upon hitting periodic goals. But the same system can deliver different rewards to employees for opening up a key account or going the extra mile to help a business grow. “The do-this-get-that dynamic is important when results are clear. But when you can catch people doing what’s right and reward them, the surprise effect is meaningful,” Wilson says. “Then the incentive strategy for people isn’t a quick-fix project. It reflects the culture of an organization and it becomes a journey.”

Money Is Great, But…
Money inspires salespeople like nothing else, according to Richard B. McKenzie, an economist and professor at the Graduate School of Management, University of California, Irvine. “With all the salespeople I’ve talked to, it’s almost universally accepted they want money.” And as sales forces grow more diverse in background and far-flung in geographic location, so grows the need to harness the universal appeal and flexibility of cash, McKenzie says.

But…products have pluses, McKenzie adds. Bulk discounts can deliver savings to the company – or more valuable rewards to the employee. And with a homogenous force of salespeople, merchandise oriented to shared lifestyles could provide the perfect inspiration. “Different strokes for different folks. If you have a family-oriented sales force, family-oriented incentives would be very beneficial,” McKenzie says. On the other hand, “sometimes giving salespeople the products they want means that their family members won’t have a claim on additional income, and the salespeople can view a product as a reward for themselves – one that their spouses don’t get to tap into.”

In his book Managing Through Incentives: How to Develop a More Collaborative, Productive and Profitable Organization (Oxford University Press, 1998), McKenzie shows managers how to boost employee performance by running incentive systems better. Money isn’t everything. The right set of rewards can inspire people to reach agreed-upon goals.

The bottom line is managers often cannot avoid incentives. As a defensive move, some companies resort to incentives to keep pace in the market – lest they face lower sales or even gamble with survival. As an offensive maneuver, well-executed incentives can guarantee higher returns.

There’s another problem. How do managers get incentives right? Get them wrong and they could power unwanted consequences. “If you give great awards to focus on today’s sales, too often a sales force might not pay enough attention to tomorrow’s sales,” McKenzie explains. “The whole process can cause floundering. It’s an unscientific and difficult process. A lot of it is by the seat of the pants. And anytime you introduce a reward program, the market’s going up or down, the labor market is changing, and all kinds of other things are going on. What works one time may not work another time.”

The Emotional Response
Take your pick: a fantasy trip or a pile of cash equivalent to the trip costs? “We’ve done the test plenty of times. They always take the money,” says John M. Jack, senior vice president of Minneapolis, Minnesota-based BI Performance Services. “But it doesn’t mean they work harder for it. They’d feel guilty about going to Maui, but there goes the emotion. The emotional content is gone.”

Jack, an incentive-industry veteran, doesn’t dispute the fact that money fetches some results. Cash promises buying power and flexibility. Each year, BI works with many companies that must use monetary awards for rebates and other programs. But consider the drawbacks. “Most people don’t know what they’re going to do with the money. They may salt it away or pay bills,” Jack says. “If you have your salespeople on a commission plan and you double the commission, will you double sales? No. You’ll have a hard time naming a spectacular achievement prompted by money.”

Why? It may be all in your head. According to Jack, an offer of a monetary reward engages the brain’s left hemisphere. There, the brain determines whether an offered award is worth the effort required to get it. “The left hemisphere does the arithmetic, but it can’t see anything,” he explains. “But if you can’t see something, you can’t be emotional about it. Money has no emotion to it.” That’s what a BI Performance Services study in 1993 and 1994 found. On the other hand, merchandise and other tangible rewards route to the right hemisphere, the half of the brain that visualizes things. Those mental pictures sometimes touch off powerful emotional responses.

With BI as its incentive partner, the Goodyear Tire & Rubber Company compared the motivational effect of cash rewards to equivalently priced merchandise and travel. To improve sales of Goodyear’s Aquatred tires, Goodyear randomly divided dealerships into two groups, offering monetary incentives to the salespeople in one dealership group and product rewards with the same cash value to the other group’s salespeople. Both groups performed better. Yet the merchandise-and-travel-awards group showed greater improvement, outperforming the monetary-rewards group by selling 46 percent more. A similar Mazda Motor of America Inc. study also found that the cash group fell far short of the noncash group in sales.

Jack cautions that the Goodyear and Mazda cases weren’t simple tests of cash-versus-product awards. BI’s patented system for issuing rewards shaped results, too. “You cannot separate the ‘how’ from the ‘what’ in a study like this,” he says. “The incentive isn’t the key piece. The key driver of behavior and response has to do with goals. If you’re offered an inducement but you don’t set a goal to earn it, chances are you won’t. You can allocate goals, but someone has to accept it and commit to it or it won’t mean anything. We have a system that encourages people to set their own goals based on their belief in what they can accomplish. Awards are commensurate with the goals. Every change process is built around goals.

“No one does anything to change their lives unless they get emotionally involved,” Jack explains. “It can involve fear: ‘If I don’t hit my quota I’ll lose my job.’ That’s a negative emotion. But positive emotions usually drive the top 20 percent of the performers – they get emotionally connected with achieving a goal. We know incentive programs are all about emotions, and the extent to which we can tap into people’s emotions controls what we achieve for our clients. It’s impossible to get emotional impact from money.”

Recognition Is a Personal Thing
Bob Nelson, a guru of work rewards and owner of Nelson Motivation Inc. in San Diego, CA, finds things to like in cash incentives and product incentives. And he sees things to dislike in both. Nelson believes any reward mix must leave a lot of room for alternatives, especially recognition and nontraditional awards.

But more important than the reward itself, Nelson believes, is how you involve employees in setting goals and picking a reward and how the reward reaches the recipient. Well-chosen and presented, a logo mug can deliver megamotivation, says Nelson, author of 1001 Ways to Take Initiative at Work (Workman Publishing, 1999). “The process and presentation are many times more important than the item used to reward others – unless that item was in part selected for its symbolism,” he explains.

As a motivator, cash has lots going for it, admits Nelson. People like it. They can spend it everywhere. It has a fairness to it. But there are disadvantages: No trophy value. Its perceived worth never exceeds its face value. It can have a “cheap” image.

By contrast, merchandise and travel awards represent an achievement. Intertwined with memories, they can reinforce ties to a company and its people. Thanks to bulk discounts, as well as the presentation possibilities, products can carry far greater perceived value than their actual costs.

What if the goal is to get the biggest bang for the buck? Product prevails over cash and the possibility of volume discounts alone doesn’t explain it all, Nelson points out. Travel and merchandise lend themselves to celebration and recognition. Never forget a reward’s biggest power can lie in its presentation. “Ship the product to the office and put it out on display at the next company meeting. Roll it over to the employee and talk about what the employee did to get it,” Nelson urges. “Public praise is powerful. The power goes off the charts.”

And mind the other p-word: process. Involve employees in setting goals – a process that encourages them to buy into the objectives. Then, ask employees what would motivate. One size doesn’t fit all, Nelson emphasizes. “What motivates people varies from person to person, so it works best to start with your people to see what they value, individually as well as a group.”

Any reward program has places for both cash and incentive products, Nelson believes. The popularity of nontraditional rewards has surged. Examples include autonomy, learning opportunities, challenges, time off, flexible work schedules and greater freedom to voice opinions or pursue an idea. Over time, employee values shift and lifestyles change. Keep asking. Never put a program on autopilot.

“Recognition is a personal thing,” he explains, “it doesn’t take a lot of time. You want to make sure everyone feels like a star. You pay them as well as you can. But regardless of what you pay them, even your top salesperson, you still need to do other things, including recognition.”

What Works over Time?
Dr. David J. Lill, professor of marketing at Belmont University in Nashville, TN, says the real issue in professional selling isn’t the comparison between product incentives or cash rewards. “You can get people to do anything by offering a reward, but can you get them to sustain it?” he asks. Lill, author of Selling: The Profession (DM Bass Publications, 1999), adds, “A product or cash incentive or even fear can work. But I’ve never been a fan of incentive motivation as lasting sustainable motivation. You have to increase the reward or change it for it to work over time.”

What works over time? According to Lill, the answer is self-motivation – the powerful internal drive that all great salespeople possess. It’s a force that can be shaped but cannot be taught. As Lill advises managers, hire motivated people, teach them how to sell and watch them perform.

Lill has first-hand knowledge of plenty of real-life practices of incentive motivation and has found faults with many of them. Too often a sales force has no say in reward choices. The burden of finding the right incentive for a diverse group falls to sales managers. They must understand what motivates each individual. “When a promised reward is highly desirable, salespeople put forth almost superhuman effort to win it. However, a promised reward that is not perceived as desirable provides no motivation for action,” Lill explains.

Lill has seen evidence of other drawbacks. When companies dangle carrots from too many products, they set the stage for failure. “When you attempt to emphasize everything, there is no emphasis on anything,” Lill points out.

While some employees want a pat on the back and a trophy in their case, others want the money. Lill sees corporate use of cash rewards tied to goals for retaining customers or securing coveted new clients. But beware of cash rewards linked solely to dollar-sales volume, warns Lill. “Rather than satisfying the customer, salespeople are tempted to spend their time focused on exceeding their numbers to maximize their own personal income.

“I do not believe the real issue or debate today is whether to offer cash incentives or product incentives to salespeople,” Lill says. “In today’s competitive market, many products, companies, and even salespeople start to look alike to the prospect. The issue really is, how can an organization uniquely meet the needs of their prospects and customers?”

Not surprisingly, companies put more and more emphasis on keeping customers happy, Lill points out. “Salespeople, and everyone in their organization, must excel at the long-term relationships they want to build with their customer base.”