Uncategorized | Behavior Matters! - Part 16

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The lost art of sales incentive communication

“The new compensation plan is only as good as the sales representative’s understanding and acceptance of the plan.”

This quote is from the December 2010 issue of World at Work’s Workspan journal.  I found it very familiar as we’ve been using the following line in our proposals since 2003 “You can have the best incentive plan in the world, but it doesn’t make a difference if your people don’t understand it or buy into it.”

I believe this with all my heart.

In fact, much of our business is built around this belief.  We work with many of our clients creating communications campaigns that drive understanding and help build buy-in to their incentive plans. We tend to think about this in a holistic way with many touch points along the way.  We don’t just craft a cool looking brochure and leave it at that. Our ideal process involves upfront analysis with interviews of participants and managers to better understand how the current plan is perceived and used.  This analysis also provides us with much needed information as to some of the barriers that we will face in trying to communicate the plan.  Then we need to think about how to break through the deluge of information that a typical sales representative is bombarded with.  We also work very hard at trying to craft words and visuals that explain the incentive plan in a very easy to understand manner – crafting multiple messages, charts and images.   The overall flow needs to be right or the impact is lost.  It is important to understand what medium the message is going to be presented in and where it comes in the continuum of communication touch points – is it the first message that is intended to generate excitement in a flash e-mail; the main presentation at the National meeting that needs to show how a sales rep can maximize their payout with this plan; or the detailed plan books that are the legal documents that contain all the minutia that an incentive plan has?    We then look at follow-up interviews and focus groups  to make sure the message got through and that we didn’t miss anything.  Throughout the year we want to communicate to the field using quick reminders and little teasers to keep the plan top of mind.

It is both an art and a science.

Which gets us to the title of this post. 

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Repost: We are NOT rational beings so why do we try to make rational incentive programs?

Take the blndfolds offTake off our rational blindfolds…

Dan Airely, Richard Thaley, Cass Sunstein, Daniel Kahneman, Ran Kivitz, and many more psychology and behavioral economics  researchers have shown that while we like to think of ourselves as rational, thinking human beings who are out to optimize our well being, we aren’t.

In fact, we are very far from it.

Sharon Begley at Newsweek wrote this interesting blog “The Limits of Reason” in it, she states, “But as psychologists have been documenting since the 1960s, humans are really, really bad at reasoning. It’s not just that we follow our emotions so often, in contexts from voting to ethics. No, even when we intend to deploy the full force of our rational faculties, we are often as ineffectual as eunuchs at an orgy.”

We see this all the time.  I wrote about it in my earlier post from today “5 Lessons from the Maze.”  We tend to act and behave in very non-rational ways.  There are lots of irrational types of behavior and thinking and lots of theory’s about them (i.e., Loss Aversion, Status Quo Bias, Gambler’s Fallacy, Hedonistic Bias, Anchoring, Reciprocity, Inequity Aversion, etc…).

Here is what is interesting – we tend to still design our incentive programs and our motivational strategies based on believing that people act in a rational manner. We create programs that have 10 different ways to earn, with multipliers, qualifiers, and ratchet effects.  We create programs with multiple components and factors that we think will drive specific behaviors and elicit particular performance results.  We believe we know what people want and use only extrinsic rewards to drive our results.

Ouch!

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Reflecting on the past and the power of purpose

Today is Martin Luther King day.  A day of remembrance and thankfulness.  A time to reflect on all that has been done by people in the past to get us to where we are today.  Particularly those people who suffered and were persecuted to correct wrongs and injustices in our society.

These people had a purpose beyond their own lives.  A purpose that motivated them to go out into hostile situations and face the possibility of harm and even death.  This inner drive was one that allowed them to see beyond their lives as individuals and see how they needed to change society.  It was a purpose larger than themselves.   It was a purpose outlined in Martin Luther King’s dream – one in which all people of the world would be judged by the character and not by the color of their skin.

I am very grateful to be able to remember and reflect on this.

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Today I’m Grateful For: Timberwolves

I am a huge Minnesota Timberwolves basketball fan. I have been a season ticket holder for a number of years. I’ve seen the good and the bad (actually a lot of bad). But through it all, I have really appreciated the organization. The team might not always win, but the customer service I’ve received is top notch. It feels nice to know that I’m not just a number but that they know my name and the name of my kid…so thank you Timberwolves organization.

Oh and let’s win a few more games!

Could your organization survive without incentives?

Here is an interesting thought experiment…

What would happen tomorrow if you removed all of the extrinsic incentives from your organization today?

Think about it.  Would your company grind to a halt?  Would it go on as if nothing had happened?  Would it limp on, not fully grinding to a halt, but maybe not at full speed?  Would it burst its seems?

What do you think would happen?

There is always that one client who drives you NUTS…

This is a true story of what happened to me and one client.Driving me nuts

It began in August.  I was contracted to conduct an analysis for a company that will remain unnamed.  The analysis looked at some specific aspects around a new product launch and involved interviewing a number of executives and sales people from across the organization.  In all I did over 40 hours of interviews.  I spent twice that amount of time analyzing the interview responses, finding patterns and insights that applied to their specific situation, assessing linkages and developing insights.

I created a comprehensive report that included an executive summary, detailed findings, recommendations for success, and a large section with selected verbatim comments from the interviews.

I thought it was pretty good.  We uncovered a lot of useful information regarding the launch process,  the sales force readiness, and the work that needed to happen leading up to the launch that could really help the company be more successful.  We had taken the pulse of the organization and reported it back in a clear and informative manner.

I’m not just tooting my own horn – the client was very pleased with the content and the findings also.  No really he was. In fact, he stated in an e-mail, “I’m very happy with the content and findings and I’m glad I used your services…”

Great.  Well done.  End of story – right?

Not so fast… you knew something else was coming….

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Risk vs Reward – which is the more powerful motivator

This interview with Daniel Kahneman talks about his Nobel award winning work on Prospect Theory.  There is some very interesting insights into how people behave in a risk vs reward type situation.  This has some implications for incentives and motivation.  How do we need to structure our reward models in response to this?

You have more than me! Thoughts on fairness and 4 ways to make it better.

by Timblair

My four year old son was playing trains downstairs with two of his friends last week.  It was going great until one of the friends somehow ended up with 5 train cars while my son only had 4.  This sent my four year old into a tizzy in which he stomped out of the room and sulked on the floor in the kitchen.

“He has more than me.” was the response I got when I asked him what was wrong.

So trying to think quickly and forgetting that I was dealing with a four year old, I asked him if he had been having fun playing with four trains before he realized that his friend had five?  “Yes…but it’s not fair.  He won’t share and he has more.

My equally “way-too-old” for a four year old response was, “but right now you have none – which is more fun, playing with four or playing with none?” I thought I had him here….

He looked at me with a quizzical stare and held up his hand with all five fingers out – “Five!” he said in response with 100% conviction.  Ahh yes, I’m dealing with a four year old mind.

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200 years of history in 4 minutes – fascinating!

This is 4 of the most interesting minutes I’ve spent in a long time…

What are the implications for this?

Creating a non-event

Non eventWhat happens when something doesn’t happen?

No, that was not a rhetorical question.

Do we recognize the importance of something because it didn’t happen or do we dismiss it since it really never happened?

Wally Bock in his Three Star Leadership letter from 12/31/10 wrote about Peter de Jager who was the first person to identify that computers might have a problem with the year 2000 and how their dates were formatted.  One of the lessons that Wally takes from this is,

“Peter de Jager Lesson Nr 1: It may be glorious to ride to the rescue after a crisis hits, but it is far more productive to head off a crisis and create a non-event.”

We are a society that loves the rescuer but often derides the person who makes the non-event. Think about it…de Jager was blasted as being a fear monger and spreading a bunch of hype (see some of the response right after Y2K here) for his warnings.   We don’t know how big of an impact Y2K would have had without the massive upfront work done on it… and yes it might have been overkill…but again, we don’t really know.   That is core of the problem.

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