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The Science Behind Successful Incentives? Change.

Written by: Tim Houlihan
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If all commissioned sales people have the same opportunity to make more money, why don’t they?

Overview

At BI WORLDWIDE Canada, we use the principles of behavioural economics to create the best engagement strategies on the planet. We work with expert academics who advise us on the latest research on human behaviour, engagement and decision-making. We use non-cash rewards and recognition to engage and motivate employees and sales teams.

Incentives work. There is no dispute about this. Dogs ring bells to get food. Mice race to get to the cheese quicker. Humans run 26.2 miles for a t-shirt and a medal. Sales people consistently maximize their comp plans when being paid a commission.

Wait a minute. Not every commissioned sales person maxes out his or her comp plan. But if all commissioned sales people have the same opportunity to make more money, why don’t they?

The answer is deceptively simple and it’s found in what behavioural economists call the hedonic treadmill. The short story is this: whatever level of income you have and the effort you exert to earn it becomes the norm. To earn more would require working harder and most people are, well, pretty complacent. All people say they want to earn more money but very few say they’ll work harder to earn more.

The hedonic treadmill 1 is similar to being on a real treadmill. At first you feel fine. After a while, you begin to feel fatigued. After several hours, the steps become normal and you almost forget about the constant motion of one foot in front of the other. The same is true with contests. If you run the same contest with the same rules on the same products with the same rewards month after month, your sales people will stop paying attention.

Changing things up helps re-energize and refocus our efforts. Here are three things you can do to improve the effectiveness of your sales incentives.

1. Change the rules.

Stack ranking is great occasionally but after awhile, the folks on the southside of the winner’s circle will stop paying attention to your“Top Ten Go To Hawaii” contest. By using a stack ranking one quarter andindividual objectives the next quarter, your sales people will think abouttheir business in light of the new rules. That consideration is a tiny act ofengagement that could lead them to working harder and deliveringgreater results for you.

2. Change the rewards.

Many sales managers believe that sales reps are coin operated so theybegin incentive conversations with cash, cash and more cash. But ifmore cash were the answer, why wouldn’t your commissioned salespeople already be working harder to earn more? Mix it up by usingdifferent rewards: dinner with the SVP of Sales, a weeklong getaway at thecompany’s condo on the Big Island or points that can be redeemed for a70” OLED curved-screen television, a Calloway XR Pro or a smart watch.Sure, they could afford to buy those things with their own money but theywon’t. You’ll give them bragging rights when they pull the new driver out oftheir bag and their golf partners wonder where they got it.“My company gave it to me for being a top performer.” The sales rep getsthe glory and you get the incremental performance required to earn it.

Incentives work. There is no dispute about this. Download Now

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Tim Houlihan at BI WORLDWIDE

Tim Houlihan

Vice President
Reward Systems Group

For more than 25 years Tim Houlihan has indulged his curiosities of human behavior in the workplace. He passionately pursues answers to questions such as “why do some people work harder than others?” and “why do some people set and achieve goals?” and acknowledges that behavioral economics holds excellent explanations for some of these mysteries. As the Vice President of Reward Systems at BIW, Tim is responsible for leading the development of innovative reward systems.He partners with academic colleagues from leading universities around the world and he is actively engaged with leaders in Fortune 1000 companies to develop solutions for the human side of business problems.

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