Why Incentives Backfire…And How To Avoid It
Incentives are used to motivate employees AND clients. Yet incentives can backfire.
If you look at Wall Street traders and execs, you can see clearly that their motivation got the better of them.
But this problem also applies to other businesses, including our own.
Let’s first explore employee incentives, both outside and inside our industry:
It can backfire in Football.
One example of how this backfired I read in the magazine Fast Company this month: Ken O’Brien was an NFL quarterback in the 80’s and 90’s. Early in his career he through a lot of interceptions; the team lawyer wrote into his contract that he would be penalized for each one he threw. The incentive worked very well, and he threw far fewer interceptions. And that is because he stopped throwing the ball. He simply stopped taking risks.
Examples in green industry.
Last year while writing my book The Referral Advantage, I was interviewing a large successful company in the DC area, and the founder of that firm told me stories of ‘incentive plans’ that worked for a few years, and then stopped working. He found this to be true whether it was hard incentives, like money, or soft incentives, like the skybox he leased for a pro ball club in his town. He said after about 18 months people stopped using the skybox, even though he had it rented for approx. a 5 year period! (ouch.)
In one company I consult, the lead sales person is motivated to sell….and sell he does! He is also asked to increase ‘quality’ levels in design and service; and there he does less of a job. He follows the money.
Incentives do work.
Incentives can work, and sometimes work all too well. The one fool-proof incentive system I have seen is incenting people to the same goals the owner is incented to, i.e. the bottom line of the P&L.
How do customers fare?
The question that I wonder is…if incentives have a spotty record in motivating employees – how well do they work with customers? This is harder to measure.
There are many examples of customer incentive systems that work. Southland Landscape Management gives bonuses in terms of flats of annuals, for property managers cross referring to other property managers. And it works well.
But even these incentives lose their luster, according to Harold Enger, Spring-Green Lawn Care. He says that both company and client soon forget about the incentives–and so they must continually be embraced and reintroduced to the clients.
Is there a better way?
This still leaves one question on the table –is there a way to get referrals without paying for them?
Or asked differently, is there a way to get even more referrals, than you would get if you paid for them?
Michael Bellantoni Sr., who runs with his sons a very successful firm in White Plains NY, says it clearly. The best way he knows to grow his business, is to stop in and visit his accounts weekly. “To succeed in his business, you simply have to do that.”
Now here is the rub – if you have built up a relationship like Michael has, then can’t you get these same level of referrals by asking for them, without having to pay for them?
My experience is that the answer is YES you can.
My experience is that you can also give ‘gifts’ as thank you’s for referrals. Sometimes an unexpected gift means more than ‘an expected payoff’ for a referral.
The lesson to be learned here is – incentives do work, and sometimes too well. Sometimes there is a subtler way to go about motivating people, that is less about money, and more about the relationships…and what each party gets from the relationship.
I think approximately 20% of the workforce is ‘heavily’ motivated by money incentives – and this is both good and bad. Good, for the obvious reasons, and bad, because the wrong incentives can take them ‘heavily’ off target.
The other 80 percent are not motivated directly by money – and this case, throwing money at them won’t be enough of a motivator.
WHAT MOTIVATES YOU?
WHAT MOTIVATES YOUR KEY PEOPLE?
HAVE YOU ASKED THEM LATELY?
Jeffrey Scott is a business coach, consultant and author, and is known as the “marketing
guru to the green industry.” He is co-owner of Glen Gate Pool & Property, where he grew
the company to $10millon, increased client retention up to 98% and increased referral
sales by 2000%!! For a FREE REPORT on “The 10 secrets to developing relationships that
will propel your sales and referrals” e-mail him at Jeff@JeffreyScott.biz.
He is also author of the book “The Referral Advantage–How to increase your sales and grow your landscape business by referral” You can learn more by visiting www.jeffreyscott.biz.