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How to motivate
high-salaried
Reward Systems at Minneapolis-based
BI, recalls being initially surprised when
his company was hired by Barneys New
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How to motivate
high-salaried
salespeople
In retrospect, it makes perfect sense,
but Tim Houlihan, Vice President of
Reward Systems at Minneapolis-based
BI, recalls being initially surprised when
his company was hired by Barneys New
York to oversee an incentive program for sales
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associates. Many of the sales floor employees
at the famous upscale department store chain
are well-off.
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“They aren’t working at Barneys for the money. They’re
working there for discounts and the access to stuff,” Houlihan
says. He knew instantly that the incentive program would be
successful. Participants earned points for selling specific brands
and could redeem those points for high-end merchandise.
“It had nothing to do with money. They didn’t need more
money,” he says.
It’s a good bet that high-earning sales reps on your team
are in a similar situation. Many companies assume that
salespeople making six-figure salaries are driven by money
and will respond best to cash incentives. Houlihan respectfully
disagrees.
“I don’t doubt that more cash will get more performance, but
how much more? The really big changes in performance come
when you offer something other than money,” he says.
Lock in on luxury
Why does a $2,000 gas grill motivate a top-performing
salesperson more than a $2,000 bonus? Two words: hedonic
luxuries.
As reported in our cover story last fall (“Why Cash
Incentives Fail” is available on our Web site), people are hesitant
to spend money on non-essentials even if they earn a substantial
income. Behavioral economists have long known that consumers
often experience an immediate “pain of paying,” which can
weaken the pleasure derived from consumption or discourage
purchases altogether.
BI creates incentive programs for companies worldwide.
Less than 1 percent of participants earn $5,000 or more in
AwardperQs points, but the overarching concept of motivating
with luxuries works across the board.
“We’re all hardwired the same,” says Houlihan. “No matter
how much you make, there’s something that everybody wants
that they won’t buy for themselves.”
Incentive pay earned for hitting a predetermined quota
typically is lumped in with overall salary and used to pay bills
or stuffed into savings accounts. There’s little “halo value” to the
award, which explains why, in Houlihan’s words, cash can
only buy a certain amount of extra effort.
Indeed, research by Ran Kivetz, a professor of marketing at
Columbia University Graduate School of Business, shows that
a significant number of people (as much as 39 percent) will
“precommit” to indulgence by selecting a luxury item as a reward
over a cash amount of equal or greater value. It makes sense,
many incentive experts argue, to lock your program participants
into the luxury category and not provide a cash option.
“People are willing to work harder for hedonic luxuries,”
Kivetz says. “When they start thinking about dollars, they
become more rational, more economical and less willing
to work for it.”
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Some sales managers settle for cash incentives because they
figure they can’t select what will motivate their high earners.
Tim Houlihan says they’ve got it half right. You can’t predict
what energizes each salesperson, but it’s unlikely to be more
money.
“If you’re a mortgage banker on Wall Street, I’m not going
to be able to pick an item for you that you’re necessarily
going to want. But I can show you a whole basket of luxuries
and something is bound to spark your interest,” he says.
Initially, clients are concerned that their high-salaried
salespeople won’t find that basket of awards motivating.
Oftentimes, Houlihan counters, it’s not the dollar value
of incentives offered through programs, but rather their
exclusivity. One company took its top-gun salespeople to fly
MiGs over Moscow; others have provided award-winners
private audiences with celebrities or behind-the-scenes tours
they couldn’t experience on their own.
MiGs over Moscow
and other exclusive awards
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Feature Story
wants to be challenged. It’s sad to say, but it really
Medtronic Knows
3 Things to
Remember
Some people like Yanni.
There’s no accounting for taste, so avoid
the one-reward-fits-all approach. BI Senior
Vice President John Jack’s favorite answer to
the riddle, why did the chicken cross the road?
Only the chicken knows.
Experiences can’t be duplicated.
Travel is a popular incentive for high earners
because it’s the ultimate indulgence. Houlihan
says travel is often thought of as “more savoring.”
Be sure to provide something more than tickets
to a destination, however. Create an experience
that can’t be duplicated.
2
1
How To Pamper Its Stars
Count Medtronic, a world leader in medical technology, among
those companies that prefer to reward top-performing, highsalaried salespeople with merchandise and travel rather than
cash.
“Participants actually like it better than cash and it doesn’t
conflict with our compensation program,” says Jane Kopp
Houlihan, a sales analyst at the Minneapolis-based FORTUNE
500 Company. She is responsible for setting sales quotas,
completing revenue trend analyses, and overseeing sales incentive
efforts for more than 100 highly compensated sales reps.
Medtronic has used BI’s AwardperQs program to motivate top
performers for the past three years.
The company’s compensation director told Houlihan in
a note that at least 10 sales reps approached him at a recent
conference to express how much they enjoyed the AwardperQs
program.
Medtronic also has awarded a top salesperson a $1,500
HDTV, a $20,000 Harley Davidson bike and numerous
trips. They also have held drawings for a Harley Davidson
and HDTVs. “The drawings create a lot of enthusiasm and
excitement, but the downside of a drawing is that someone with
only one ticket can win the big prize while the hard-working rep
with 30 tickets can go home with nothing.”
Don’t drag it out.
A tendency when using expensive rewards is to
lengthen the incentive program’s time frame.
That’s a mistake, says Houlihan. The trip to Maui
for top performers at the end of the year is more
recognition rather than incentive. “It’s hard to
keep people engaged in something for a full year.
Very few people in our society pursue long-term
goals.” Allowing participants to accrue points
from several three-month programs will produce
better results.
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3
What’s My Motivation?
Don’t over-think the reward. Most top performers are
self-driven.
“When I’ve had the opportunity to run focus groups for
high-earning salespeople, so much of what motivates them
is the challenge itself and the recognition of being No. 1
when the competition is stiff,” says Tim Houlihan of BI.
“I remember one guy asking how high the goals in a
program would be? ‘How high do you think they need to
be?’ I asked. He said he’s typically at 120 percent of quota.
‘Whatever the top level is, I’m going for it.’
“When he said that, I immediately knew that
he is a guy who competes against himself. He just
wants to be challenged. It’s sad to say, but it really
wasn’t about the rewards at all. It was all about his
intrinsic motivation. But if he could connect his
own personal goal to achieve something above
and beyond with a lifestyle item that he couldn’t
afford or wouldn’t afford, it would be icing on the
cake.”
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