It’s a typical scenario in business and in the world in general. You set a goal for something, such as a sales goal, and then you establish attractive rewards for reaching that goal.
Then, when someone attains that goal, you reward them as a way of saying thank you for the hard work. It all seems pretty straightforward, right? Well, some people, including behavioral scientists and economists, say that this way of thinking may not be getting the best results.
A couple of years ago an economist decided to do a study on rewards and incentives. He picked schools in big cities such as New York, Washington, D.C., Dallas and Chicago where he set up control groups and then varied the way rewards would be distributed to the students in the those cities. In fact, he gained a lot of criticism by offering to pay students for their achievements on tests.
What he found was that, in places like New York, where he paid strictly for test scores given during the course of the year, there was little improvement when it came to the yearly standard aptitude scores. However, in Dallas, where a modest amount was paid out to students every time they finished reading a book, there were huge gains made not only in reading, but reading comprehension and test scores. Why did this happen?
Although the economist and others who have studied the results have come up with a variety of explanations for why this happened, there are some who feel that the answer is simple. While some of the groups were rewarded strictly for their results, as is the case with most employee incentive and reward programs, those in Dallas were rewarded for the process.
They got money regardless of a higher test score. They just had to enjoy reading to make $2. Because they enjoyed the process more, they retained more and ended up testing better in the long run.
Now, imagine this scenario in the business world. You are a sales person at a company that sells Widgets. You manage to make a whole lot of sales, but they are to smaller companies, which means you’re earning smaller commissions and, ultimately, a less amount overall for the company.
Your colleague, however, who has longstanding clients who buy more products and bring a little more prestige to the company, out-paces you when the sales contests come along. With just one sale to a large client he easily eclipses two or three sales of your smaller clientele. You work just as hard as the guy making the bigger sale, if not harder, but your return is less. How long would you keep that up before you got so discouraged that you decided to look elsewhere?
A good way to think about this is to remember the old phrase, “the journey is more important than the destination.” Too many companies fixate on the bottom line – and only reward at the end when the person crosses some pre-determined finish line. This ignores, however, the process that it takes to get there and often excludes many good producers along the way, and they may be your best talent.
For sales people, it is often the intangible things that really benefit the company. For example, the relationships that a sales person establishes with a client can sometimes outweigh the number of sales produced or the size of the commission made. A good relationship can lead to word-of-mouth referrals and potential organic growth down the road. Again, a short-sighted company that only looks at the results may miss that and fail to reward a hard-working employee who has been establishing successful relationships all along the way.
If that sounds intriguing to you, remember that more and more studies are showing that employees are ready to try looking elsewhere for jobs that reward them more often and in different ways than have been done previously. They are looking for companies that take a “personalized approach to how they do business.
These companies know that by keeping their workforce happy, they create a great working environment that leads to teamwork, and ultimately to increased productivity. Rather than just looking towards increased profits and sales, they look at their people first. It’s a concept that is relatively new and many companies still find the idea contrary to the norm – and those companies are wondering why their people are leaving in droves as the economy improves.
Now’s the time to think about changing the way you reward your people. Perhaps you can reward them at different times throughout the year rather than at the end of the fiscal year when they’ve crossed an arbitrary finish line.
Or, set new standards by rewarding the hard-working, but lower-revenue sales person so it’s not just your star sales person reaping all the rewards. Rewarding the process rather than just the result could be your best decision yet.
