Recognition and Incentives – Best Practices

Let’s first define the difference between a Recognition and and Incentive Program:

Recognition Programs:  Involves a vital social aspect of the business where a producer / performer is recognized by peers for their performance.  Behavioral science suggests this may be the highest (most powerful) form of motivation.

Incentive Programs:  People earn non-cash rewards for meeting various requirements in addition to the compensation plan

There are two primary components to a Recognition Strategy:

  1. Company Driven:  The company directly recognizes performers for achieving notable milestones or levels of performance.  Recognition is often done in a highly public venue such as conventions, web site recognition pages, monthly magazine, etc.  There should be a strong social connection between the recognized person and their peers.  A country-by-country approach can better facilitate most company driven recognition (for a multi-national).  Example:  The company publishes a list of people achieving Gold Consultant for their first time on the company web site with pictures and a short blurb about them.  Example:  the company recognizes new Diamond Leaders that have grown their business by 50% since becoming a Diamond Leader at a training event by inviting them to sit in a special seating section and then walking across the stage.
  2. Field Driven:  The company creates a recognition system and teaches it to field leaders and team managers thereby establishing a consistent approach to recognition in peer groups (teams) leveraging the immense power of social group motivation (positive peer recognition).  The vast majority of recipients of recognition will be affected at this level rather than at the company level.  For example… a new recruit sponsors their first new recruit.  The Team Leader recognizes this first major accomplishment in a team meeting or conference call.  Example 2:  a distributor advances to a higher rank in the career path and their Team Leader recognizes them in a team meeting.  They get a certificate or a jar of M&M’s or something.  It’s not the value of the reward.  It’s what the reward MEANS.  It could be a logo coffee mug or a tote bag.  But if presented in a group setting, it will carry immense value to the recipient.

What to avoid:

  1. Top 10 recognition: never works. Do not limit the number of people to be recognized as it will quickly devolve into more losers than winners and will lose any motivational power to the masses in the future. Never limit the “winners” but, instead, set the bar, train to it, and recognize EVERYBODY that achieves it.
  2. Distract people away from the compensation plan / career path: The career path reflects the vital behaviors (and rules) required to succeed. Always focus them on the best way (Amway best practices) to succeed in the business. Don’t create “innovative” ways to recognize people with other types of behaviors. Keep it simple and focus them on your best practices that build consistent success patterns. The more a company distracts people away from the career path by recognizing other non-related behaviors, the less ROI the company gets from their commission dollars spent. Instead, drive people TO the career path / comp plan by synergizing your recognition strategies (company and field) to the comp plan. Key emphasis:  career path recognition. Your career path should be the backbone of your recognition strategy at all levels.
  3. Constantly changing rules for recognition: equally fatal. See #2 above.
  4. Recognition by field only / Recognition by company only: it takes both working together in a cohesive, well designed recognition system. A ‘system’ is a process or set of actions that a) is duplicable / trainable and b) produces predictable results.

Best Practices for Incentives:

  1.  Align all incentive programs with the compensation plan so people are not distracted away from the comp plan.  In time this will reduce the ROI of the comp plan and create a highly reactionary culture that waits for the next incentive before they do anything.  Not a sustainable business model.  Fatal in most cases.
  2. Most companies spend between 2% to 5% of revenue on incentives and recognition.  This is a separate P&L budget line item not included in the compensation plan.  The comp plan payout should be constant for a large company.  Its rules do not change.  Incentives, on the other hand, have rules that change often and, therefore, must be budgeted separately.
  3. Always have clear and specific behavioral objectives:  what behaviors are we trying to reward / improve? (think of the 5 Golden Behaviors: selling, recruiting, building team leaders, building leaders of team leaders, and retention).
  4. Incentive programs should last 3 months or more to get good traction with the field.  Shorter incentives often expire at the very time when they are starting to gain momentum.  It takes a while to communicate and train a new incentive program.  Expensive incentives such as cruises, trips, etc., should last 6 months or more to be cost justified.
  5. Avoid an incentive that rewards the same people every time.  You are looking to increase the pool of performers – not just reward the people who would have done it anyway.
  6. Train them how to succeed with the incentive program.  Direct selling companies are often experts at trying to solve problems with motivational solutions.  Yet many problems are not motivation caused but, instead, a competency problem.  For example, to drive recruitment a company may offer a great bonus for recruiting 3 new people who generate $1,000 in volume.  But they fail to teach people how to recruit.  Then they wonder why the incentive didn’t work so well.  Always assume most people need to learn how to earn the incentive reward and create a training strategy that goes with the incentive program.  You’ll always get more ROI combining effective training together with a good incentive.
  7. Leverage the power of recognition with your incentive program.  Recognize incentive reward earners publicly.  Make sure that field leaders know who their downline incentive earners are so the field can do their part for recognition.

If you want to discuss these principles and best practices more with us, just schedule a call. We are happy to help…