BrainTrust Query: Why Your Incentive Plan Might Be Killing Sales

Dec 27, 2010

Commentary by Doug Stephens, President, Retail Prophet

Through a special arrangement,
presented here for discussion is a summary of a current article from the Retail
Prophet Consulting blog.

Daniel Pink’s most recent work, "Drive:
The Surprising Truth About What Motivates Us," suggests that traditional
do-this-get-that reward systems not only often have a minimal effect on performance
but can actually have a negative and stifling impact on work that relies on
creativity and problem solving.

Surprisingly, many of the incentive and
performance schemes companies operate with today actually have their roots
in the post-industrial revolution school of thought known as scientific management,
originated over a century ago. Focusing largely on manual tasks, traditional
incentives based on rewards and losses worked because the tasks in question
were largely functional in nature, e.g.:  produce
10 more units per hour and get an extra ten dollars. What more contemporary studies
reveal, however, is that these same kinds of external stimuli tend not to work
when the task at hand involves creating, innovating or problem solving.

suggests Mr. Pink, once people are being paid adequately and fairly, so as
to take the issue of money off the table, companies should really focus their
attention on the higher human needs to motivate creative workers. What are
those higher needs? Mr. Pink suggests that the autonomy to own one’s
work, opportunity to develop mastery at what we do and, above all, a sense of
purpose greater than ourselves are the true drivers of performance.

I would argue
that active selling — not to be confused with passive service —
requires significant creativity and problem solving ability. Unlike a service
role, a true salesperson operates under dynamic circumstances with each customer’s
needs being slightly different than the next. They rely on their creativity
and ingenuity to develop unique product and service solutions to meet each of
those needs. Selling, if done well, is hardly a routine endeavor and yet
for over a century we’ve been incentivising salespeople as though they
worked on an assembly line!

So the question for retail H.R. professionals is,
how does your organization characterize the sales role in your stores? Is it
seen as a largely menial, repetitive and systematic function? Or is it seen
as a dynamic and creatively centered position?

This alignment of leadership
on these fundamental expectations of the sales function is critical. Until
the experience they hope to deliver to consumers is determined, a retailer
can’t fully articulate the organizational expectations
of their salespeople. And without clear expectations, stores can’t properly
design a system to motivate the right behaviors. In fact, the incentives
might actually de-motivate the behaviors stores most want to promote.

Discussion Questions: Are the traditional carrot and stick types of incentive
plans adequately motivating retail sales associates? With technology increasingly
taking care of in-store tasks, should management’s expectations of
the sales role be evolving? Are there any retailers you regard as progressive
in their approach to employee performance management?

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17 Comments on "BrainTrust Query: Why Your Incentive Plan Might Be Killing Sales"

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Bob Phibbs
11 years 5 months ago

I appreciate Doug’s thoughtful take on Mr. Pink’s book but I am not sure Drive explains it all. The sense of purpose greater than ourselves as the true driver of performance comes from within, not a boss.

For certain personalities, like the Driver and Expressives (which I cover in my book and in this quiz) both of which I have managed as well as clients whose entire sales model is built on incentives-they do indeed deliver impressive gains. Without the ability to crow about their accomplishments, get the prize, shatter the goal, I don’t think they’d enjoy their jobs as well. Kum-bay-yah only goes so far….

Ian Percy
11 years 5 months ago
“Actually,” the article reads, incentive systems “have their roots in the post-industrial revolution school of thought known as scientific management, originated over a century ago.” I suggest the origination is over three centuries old. You can thank Newton back in the 16 hundreds. As I’m sure I’ve noted far too often in these threads, we simply do not seem able to rescue ourselves from the mechanistic mindset in which life is one big maze of wheels and gears that need oiling once in a while. So Pink comes along (with what is an excellent book) and points out something that has been part of human chi since the beginning of time, perhaps before. We are energetic beings in an energetic universe. We have the capability, responsibility — and need — to co-create higher and higher possibilities into new realities; or what Einstein called ‘persistent illusions’. When that is taken from us we lose Self and bushels of carrots will not bring it back. Leadership is about aligning all of an organization’s energy toward its highest… Read more »
Mel Kleiman
11 years 5 months ago

I love what Pink talks and writes about only because I agree with it.

But I don’t think Pink’s work applies much to retail because of the following reasons:
1. Most retailers don’t pay enough to take money off the table as a motivator.
2. Most retail jobs are just like factory jobs of the 19th century.
3. Retailers do a bad job of hiring the right people. They hire warm bodies.
4. If you treat your employees as a commodity they are a commodity.

Fabien Tiburce
Fabien Tiburce
11 years 5 months ago

Once the most prominent Canadian department store, the Eaton’s brand was driven into bankruptcy and oblivion (by the great grand-children of the founder no less) with the notion that a department store didn’t need to rely on promotions and incentives to drive traffic. Eaton’s turned to “Every Day Low Prices” as was popular at grocery stores at the time. 10 years later, traffic was way down and attempts to revive it turned out to be too little too late.

My point is that retailers should be very cautious downplaying incentives and promotions. We would all like to think that one’s brand is strong enough to drive traffic organically but the reality is that in a competitive marketplace, incentives and promotions do create brand awareness and foot (and virtual) traffic.

At the very least, if you choose to downplay incentives, don’t be the farm on it. In retail, the fall from grace can be quick and irreversible.

Bill Emerson
Bill Emerson
11 years 5 months ago

While monetary reward is a powerful motivator, it is definitely not the primary motivator. People, after all, are not automobiles (If I put better gas in, they’ll go faster). People are, well, people. They are essentially emotional creatures.

In my own experience the most powerful motivator is an equal balance of responsibility and authority along with the tools and training to succeed. In other words, if you provide the capability of succeeding and then hold associates responsible for that success, the winners emerge very quickly.

If, on the other hand, you assign responsibility without authority and/or the tools needed to succeed, the winners go elsewhere, also very quickly.

Ryan Mathews
11 years 5 months ago

Retail sales isn’t treated as a profession by most employers so it is difficult to understand how to manage it in a professional manner. Retail workers are (on average) underpaid, under-benefited and lack even a basic sense of predictability of hours. So…the first step to increasing performance might be to normalize the job itself first.

Veronica Kraushaar
Veronica Kraushaar
11 years 5 months ago

The Pink treatise is interesting because it begs the question of what retailers like Nordstrom, Gumps and others are doing right that makes their salespeople superior. What motivates a Nordy sales associate to go out of her way to personally deliver an altered outfit to your home hours prior to the special event? How about the Schwann (frozen foods) DSR who calls you before Christmas to ask if there is anything last-minute you need for your dinner: if he doesn’t have it he’ll go to the supermarket and get it for you…It’s gotta be more than money!

Roger Saunders
11 years 5 months ago

Doug’s comments offer the right direction for retail organizations to consider. This type of plan, however, doesn’t belong in the HR department alone. They need to be a part of the plan, but the key driver has to the the operations team.

Store/department managers need to talk associates into position each and every day. On an ongoing basis, associates need to be updated on how the group is doing to plan … that could be the monthly plan, the weekly plan, or the day’s plan.

People DO WANT TO BE PART OF SOMETHING BIGGER. The operations team leaders need to teach and coach that practice, so that all in the store are moving in a concerted manner. Incentives — financial or motivational — have some basics that can and should be communicated regularly. The incentive should:

1. Be consistent with company objectives
2. Provide a clear direction for associates to pursue
3. Get associates excited and experiencing a sense of WIN
4. Be timely, so that all associates are kept in the ‘game’.

Bill Hanifin
11 years 5 months ago

There are some brilliant comments here from several contributors recognizing that retail sales persons are in fact much closer to low-paid assembly line workers than many employers would admit.

Incentives remain important for these people, but they won’t earn them unless they can present and explain offers or specials in a simple way to engage a customer and create a sale that triggers the commission.

It sounds simple, but its important to note that retail sales associates didn’t sign on to sell, they signed on to provide service to customers and facilitate check-out. To push most of these people into a sales role that requires creativity and dynamic thought is not what they signed up for and they aren’t paid enough to apply the effort.

Retailers should keep it simple. Why not strive to improve customer service and customer satisfaction through better trained associates. That is something each associate should be capable of delivering and will yield the desired results for all parties.

Gene Detroyer
11 years 5 months ago

The Hawthorne Effect explains an awful lot of how to incentivize people and little has to do with financial rewards.

In the mid-1920’s at the Hawthorne Works, a study was commissioned to see if its workers would become more productive in higher or lower levels of light. The workers’ productivity seemed to improve when changes were made and slumped when the study was concluded. It was suggested that the productivity gain was due not to the amount of light but to the motivational effect of the interest being shown in them. Unfortunately, too often in the retail environment, few retailers and managers show interest in their employees.

It is always more than money.

John Hyman
11 years 5 months ago

I long for the day when stores (especially department stores) have professionals behind the counters like they did in the 1940’s and not the check-out clerks they have today. Yes, it is expensive; yes it requires a dynamic HR hiring and evaluating initiative; yes it requires an investment in ongoing training and development (especially product knowledge); but it has a larger purpose — it makes shopping an event.

In such an environment, incentives need to be personal and suited for an individual but generate huge results, because you have a highly intelligent, trained professional, not just a warm body. People will fight to work there!

Sadly, this is a mantra and not a vision. And why retail clerk turnover is the revolving door it is.

Craig Sundstrom
11 years 5 months ago

Ladies and Gentlemen, our new Director of Sales, Mr. Deepak Chopra. OK, it’s easy enough to fun a little with what sounds like New Age meets the cash register, but do I disagree with (what appears to me to be) the premise of the article — that incentive systems are too rigid and ignore people’s “higher needs.” But I’m not sure I entirely agree either. An incentive obviously rewards the ends (a successful sale) rather than the means (the creative part) because that’s ultimately what a company is interested in … chants of “we care” notwithstanding. The problem of course is the same as it has always been: teaching that “means” to those who are not born with it.

James Tenser
11 years 5 months ago

It’s evidently a mistake to assume that small monetary incentives are motivating to retail workers.

Spiffs may stimulate some degree of selling behavior but at the same time they can underscore the inadequacy of core service practices and their enabling tools.

Sales incentives can be stifling to the team if they are a set-up for workplace frustration. Ask the checkers at Best Buy who are required to ask shoppers to purchase extended warranty plans.

Mark Johnson
Mark Johnson
11 years 5 months ago

I agree with Bill Hanifin’s comments; people respond to all kind of stimulus. I think two things we need to be cognizant of is that people are not always rational and the study/impact of behavioral economics is a varied and vast topic.

“Drive” was not that unique or impactful of a book to me.

Doug Stephens
Doug Stephens
11 years 5 months ago

Wow. Great comments and perspectives thus far. Thanks to all who’ve contributed.

For those who have a few minutes, here’s a talk that Daniel Pink delivered at a recent TED conference that perhaps even more clearly articulates the premise of his book and exactly why traditional incentives are outmoded.

It’s 19 minutes well spent.

Ted Hurlbut
Ted Hurlbut
11 years 5 months ago

As far as retail is concerned, Daniel Pink’s perspective is strictly theoretical unless and until the major national retailers truly believe that sales people can really drive the top line, rather than merely run up the expense line.

I happen to think Mr. Pink is spot on with what he says. The problem for mass-market retail is with margins under constant pressure, few are willing to invest in highly skilled sales staff. In their minds, seemingly, store level payroll is one of the few expense lines that they can be actively managed to maintain profitability.

Ralph Jacobson
11 years 5 months ago
So many of the great comments here all lead to one overarching theme: Corporate Culture. With few exceptions retail salespeople do not receive the level of training that other industries provide their sales teams. Think of what makes the retailers with the best reputation for customer service great. Their store people, be them salespeople or other personnel, communicate a desire to satisfy the shoppers’ needs. So, in the case of salespeople, their financial incentives often provide the compelling reason to sell, however what is driving the non-commission employees to fulfill shoppers’ needs? It is the corporate culture driven into their every task. Led by store management’s example. There are aspects of the sales process that can be transferred from other industries to retail. However, retailers need to capture the keys to shopper satisfaction and use those keys as levers for all store-level people to utilize. “Treat each customer the way you would want to be treated.” “What would be the detriment to our store if we gave the customer what they want?” “Give them what… Read more »

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