Incentive Compensation | Behavior Matters! - Part 2

Tag: Incentive Compensation

The Story vs. The Analyst: How good communication gets ruined!

The largest part of our business is developing communications for sales incentive plans.  We create presentations, develop plan books, and design flash and other forms of communication. We got into this work by accident (one client many years ago asked us to create a “meeting in a box” for his IC plan – the rest, as they say, is history), but now we embrace it and have carved out a niche.  That niche is taking highly analytical and dry plan data and making it more interesting, more engaging, and more motivating for the sales representative.  Over the past 10 years we have done just this for thousands of plans and hundreds of thousands of participants.

We strive to tell a visual and emotive story with our work.  We work hard at capturing the vital information that is important to a sales person and making that information understandable and engaging.  I like to think we do a good job – when our clients allow us to.  You see, telling a story about incentive compensation and creating captivating visuals to convey that information isn’t easy.  It requires that we make choices about what information we share.  It means that we may have to simplify the message.  It may mean changing how we present and what types of communication that we use.  This, for some clients, is easier said than done.

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3 tips to increase the Drive to Acquire & Achieve

Four Drive Model

The first drive in the Four Drive Model of Employee Motivation is the drive to Acquire & Achieve. This is typically the drive that most organizations focus on when they are trying to find a lever to influence employee motivation.

However, companies often get too caught up in the financial aspects of this drive (i.e., how much of a raise can we give, what is our targeted incentive/bonus payout, etc…).

The following are three quick tips to help you think about how to impact this drive and increase employee motivation.

1. It’s not just about the money. It is so much more…This drive also includes the drive to achieve. Achievement takes on a number of different forms. Think about this in terms of grades – there is no monetary component to this, yet we are driven to try to get an A. In organizations, recognition is a very powerful motivator because it recognizes individuals or group achievement (kind of like a report card). Organizations can tap into the drive to achieve by focusing on ensuring that recognition is done correctly (e.g., timely, relevant, and appropriate to the effort/result).

Achievement is also about setting realistic goals that can be achieved. Short-term milestones are elements to use to help keep this drive up. One way to think about this is to think about the need to reinforce achievement on at minimum every 5 weeks. If you don’t have a milestones set up that fall within that time frame, you will tend to lose people. Make sure that you celebrate those milestones as well.  One thing that we are trying to get better at The Lantern Group is celebrating when a project or milestone is done. We get so caught up in the next project or next event that we don’t take the time to stop and congratulate ourselves on a job well done.

2. Add Some Perks. While we tend to focus on the big items like pay and bonuses with this drive, some of the more powerful levers that we get to pull are smaller “perks” such as office space, titles, parking spots, flexibility to work from home and other things that help satisfy the Achieve drive.

In addition, there are a number of small perks that also tie into the Acquire side of the equation, such as pizza Fridays, movie days, lunch seminars, discounts on classes, days off, foosball or pool in the office, employee of the month/quarter/year… You will notice that a number of these also contribute to the other three drives of Bond & Belong, Challenge & Comprehend, and Define & Defendsee also Four Drive Model

3. Improve your Total Rewards Communication. Too many times we’ve worked with companies that offer fantastic total rewards – not just their base salary, but their benefits, bonus programs, culture and recognition opportunities; however, no one at the company knows about these programs!  This is because they are outlined in a legal terms in a five different 50 page HR documents. It is vital that you market what you are providing to people in a way that will capture their attention and convey the big picture.That means that you have to overcome silos within the organization and market your Total Rewards as a comprehensive program that highlights the offerings from across the organization.

Also, make sure that your Total Reward communications are not just a one-time effort at the beginning of the year, but instead a campaign that highlights various aspects of your offering throughout the year and keeps people engaged and charged up.

While the concept behind these ideas is simple, the implementation of them isn’t always as easy. If you need help, please give us a call. We can help you work through the issues and improve your employee’s motivation!

Kurt

Do you really know what makes you tick? OR You think you know what motivates you – but you really don’t

Climbing Mountain

We believe we know what gets us up in the morning and rearing to go – don’t we?   If someone asked you what motivates you, you would be able to tell them – right?  Our ability to reflect on our own motivations is a belief that we all think we do well.  I would argue that we are fooling ourselves and we really aren’t as good at it as we think.

Case in point, research has continually shown that when asked what type of reward employees think would be most motivating or that they would most want, they choose “cash.”  Our own research shows that when asked, 70% to 80% of employees  typically listed cash as the top reward.  However, when you actually look at studies that show performance lift, non-cash awards have a greater impact.  Dr. Dan Ariely, the author of Predictably Irrational recently blogged about this (See http://www.predictablyirrational.com).  He cites an experiment done with Goodyear Tire company in which non-cash rewards improved performance more than double what the cash rewards did.  In fact, there are numerous studies that support this idea.

So how can it be that if asked most people would state they prefer cash incentives but perform better when offered non-cash incentives?  Part of the reason is because we don’t really understand what drives us?  Cash is easy.  We understand it.  Economists point out that cash has “utility” – in other words it can be used to purchase any number of items that we desire.  Non-cash is not so simple.  We might not like the choices we have or feel limited by the selection.  So what gives?

Dr. Scott Jeffrey’s has done much work on understanding this phenomena  (see http://www.incentivecentral.org/awards/whitepapers/benefits_of_tangible_non_monetary_incentives.1830.html).  Much of it comes down to how we evaluate, separate, justify and are socially reinforced by each incentive.   In other words, we evaluate the value of cash and non-cash differently resulting in a higher value placed on non-cash elements do to affective factors (we can visualize ourselves with a new 56” TV and that gives us a good feeling – this is one step removed with cash).  We also tend to lump cash bonuses in with our paycheck and it isn’t seen a separate, special reward.  We have to justify spending our cash awards on luxury items such as the above mentioned TV instead of paying down the mortgage – not so when we are only offered luxury items.  And finally we tend to not talk about the cash we earn to our peers and friends – but we do tend to talk about that new TV (or trip to Hawaii, or new Golf Clubs, etc…) and are socially reinforced by the bragging rights of those conversations.

So back to the initial question of understanding our motivations – we can see that there is much more to the story than asking people what motivates them.  The fact is we don’t always consciously know what motivates us (think Freud).  So while asking your employees what  they want is a good first step, make sure it isn’t your only step.  You need to dig a little deeper to get at their underlying drives.

Kurt Nelson

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Interviews Show That Compensation Plans Are Not Effective

money house

Do you know how you are compensated for the work that you do?

You may be surprised that there are many employees who have little understanding of how they are compensated for their work.   How can that be possible? Aren’t employees motivated by money? If this is true, then why would they not know how to squeeze every penny out of their compensation plan and maximize it?

Over the last year, I have interviewed approximately 50 individuals soliciting feedback about their incentive compensation plan.   Surprisingly, even though the industries and compensation plans were different, the interviewees stated similar concerns about how they were compensated for their work.  

Here is a snapshot of some of the responses:

  • Interviewees did not fully understand how they earned with their compensation plan
  • The compensation plan was too complex
  • The compensation plan was not communicated or trained effectively
  • The compensation plan components did not reflect actual job duties in the field

The above concerns can lead to an unmotivated workforce which can turn into organizational or departmental goals being unmet. There is little room for error in today’s economy because it may determine the success or demise of an organization.

In this new economy, effective and aligned compensation plans can be an effective tool for harnessing individual, team, and organizational success.

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