Incent Right? Incent Differently

Earlier this week, this article on Yahoo Finance caught my eye. The article is titled, ‘Firms Try to Shore Up Incentive Pay’, and talks about how many companies today are faced with sagging morale among their employees, and as such, are looking for ways to keep their staff whole – especially when things like stock awards, MBOs and other variable compensation targets are not being achieved.

Obviously, this is a topic that much interests me, seeing as how I’m in the business of helping companies to incent their people in the right ways. In the past, I’ve referred to this as ‘Behavioral Science’, and it’s an area that has become increasingly germane as the economy has soured.

This Yahoo article says, “As plummeting stock prices and profits pummel companies' incentive-pay plans, many firms are considering extra measures to reward employees… nearly three-quarters had implemented or were considering such measures, including stock awards or special bonuses. Respondents said they were worried about keeping key workers and boosting morale in the turbulent economy.”

Now, intuitively, one might say that it seems less likely that companies would experience employee turnover during turbulent times, as people who have stable employment would want to make sure that things stay that way. However, top-performers are always in demand, and those are the people companies can least afford to lose, especially now. Unfortunately, those are the people who are not making their bonuses currently.

“… many surveyed companies said they were thinking of tweaking bonus plans to increase their chances of paying out, and modifying long-term incentive programs to "improve the value" for workers. Nearly a third said they were considering additional programs to keep key employees -- often special payments to supplement regular bonus pools.”

One possible answer is the use of non-cash rewards as a way to motivate behavior and improve performance. Non-cash rewards have proven effective in motivating employees to excel in all types of economies. And they have proven effective not just for the sales team, but other functions such as customer support, marketing and other specific corporate audiences.

Non-cash rewards go where cash cannot in rewarding specific behaviors and creating a positive work environment. They provide greater agility anytime there’s a special opportunity such as rewarding up sell or cross sell, moving excess inventory in the channel, resolving customer-support cases, attracting prospects to marketing events, etc. The instant gratification factor of non-cash rewards also is attractive to many employees, particularly younger employees with little patience for annual or semiannual bonuses.

Put on your behavioral scientist white lab coat and give it a try. Let’s get creative.

Announcing the Launch of XACTLY REWARDS

I’m excited today to announce our newest product, Xactly Rewards.

Let me tell you a bit about it, because this launch has been getting a lot of wonderful attention in the media, and for good reason, I think.

In the past, I’ve spent time in the blog discussing the benefits of ‘non-cash rewards’, and I think it’s an incredibly powerful tool to use in order for companies to improve performance – perhaps even more so than using the good, old standby – cash.

In fact, a University of Chicago study found that NON-cash rewards boosted performance by an astounding 38.6%, compared to only a 14.6% boost using cash alone.

Why would non-cash rewards be so much more effective than cash at improving employee behavior and performance?

The allure of getting those new golf clubs, or a trip to Cancun, or Springsteen tickets, tends to be a stronger inducement than simply an impersonal amount of cash. Instant gratification can be very powerful, it seems.

Xactly Rewards harnesses that power.

This is the world’s first non-cash incentive application that is directly integrated into your CRM tool. Imagine designing a contest for your sales team, or devising a SPIF for your call center or tech support team, and being able to put it into place with virtually no effort?

Our team built this tool natively on Salesforce’s Force.com platform. We leveraged their infrastructure 100% (utilizing the AppEx code, Web Services and API), which allowed us to rapidly develop and deploy the tool on Salesforce’s AppExchange.

Best of all, companies will be able to test this tool out for themselves with no obligation and no cost. Come check it out – I invite you to TRY XACTLY REWARDS FOR FREE December 1, 2008.

Behavioral Science - Part II

I’m sure everyone has seen the coverage a major oil company received recently when they announced a quarterly profit of nearly $12 BILLION – the highest ever recorded in corporate history.

I’m a CEO, and my company is not a non-profit organization; which is to say, we’re all in the corporate world to make a profit. But twelve billion dollars a quarter is more than a little offensive to me.

The good news is that consumer backlash seems to have begun, and as a result prices at the pump have begun to fall. As a fan of behavioral science, I find these types of sociological tipping points very interesting indeed.

It has always seemed to me as though the demand for gasoline is relatively inelastic. In other words, demand and consumption of gasoline historically has not been materially affected by the price of gas; which is a pretty sweet position for big oil – no matter what ridiculous price they chose to throw at the American consumer, demand for gas wouldn’t fall.

That’s finally starting to change, and the falling prices are evidence of that (not to mention the plummeting sales of gas-guzzling SUVs) – oil companies have finally given consumers the incentive they needed to change their behavior.


Speaking of incenting to change behavior – hey, that’s one of my favorite topics! – let me relate a quick story.

Recently, I found myself on an Alaska Airlines flight, taking me from Here to There. After the flight attendant made the standard safety announcements, she launched into an elaborate spiel about an Alaska Airlines credit card offer. She talked it up in a big way, and clearly knew the program backward and forward. I was impressed – I’ve had sales reps who could’ve learned a thing or two from this young lady!

This got me curious, and upon de-planing at my destination, I made a point of going up to her; I wanted to know if the airline incented her to do this.


She confirmed that, indeed, Alaska Air paid her a small commission for every new credit card account that she managed to recruit from one of her flights.

I complimented her on a job well done and stepped off the plane with a small smile creeping across my face.

Clearly, more and more companies are realizing the power of this type of ‘behavioral science’ – incenting their people in order to elicit the desired behavior.

It does my heart good to see it.

Part III - Rewarding Behaviors: Automate Call Center Rewards

Automate Rewards to Further Drive Call Center Performance

The main reason why non-cash rewards are underutilized and undervalued in call centers is that managing an effective rewards program is a complex task – from creation to fulfillment to accounting and compliance. To simplify the process, organizations dumb-down their rewards programs, leading to less than optimal results. But there is another and better way to simplify the process and that is to automate it, end to end. That way the program can be as sophisticated and flexible as it needs to be. However, automation of rewards incentive programs hasn’t been an option until very recently.

As odd as it seems, there are still pockets in some companies that resist automation, relying instead on error-prone spreadsheets and time-consuming manual processes. Call centers, on the other hand, are enabled by automation, and the automation required for effectively implementing and managing rewards dovetails with the automation already in place for strategic CRM and performance management processes. Today, rewards program automation can bring to call centers the ability to:

• Tailor rewards programs to individuals, groups and teams. Freed from manual processes, non-cash rewards programs can be precisely tailored to any number of call center employees across any number of functions from outbound sales to customer service to full account management. Personalization is no longer an issue, and complexity is no longer a stumbling block.
• Align rewards to the success of multiple concurrent call center initiatives. Automation enables non-cash rewards programs to be easily designed and implemented for enhancing customer service (tied to call handling metrics), technical support (tied to case/issue resolution rate), teleprospecting (tied to qualified prospects), and general customer satisfaction, to cite a few examples.
• Offer the largest selection of value-oriented, tangible rewards. Automation enables you to create and maintain immense catalogs of rewards online – from millions of leading brand-merchandise items to tickets to entertainment and sporting events to travel, adventure and hotel packages and adventure options throughout the world.
• Integrate with CRM applications to streamline administration, provide visibility into attainment, drive recognition, and accelerate fulfillment. This benefit is huge. Just envision a call center agent’s action (an up-sell, cross-sell, etc.) being registered in the CRM system, and having that action automatically rewarded with the assigning of reward points. Then imagine that agent being able to view an online compensation statement to check how many points have been awarded (and/or redeemed) to date, all within the familiar CRM application. And then imagine the agent being able to check an online catalog of prizes to see what can be had in exchange for their accumulated points – again, all within the CRM application.
• Ensure compliance. Non-cash rewards incentive programs are considered compensation based on their cash value. The headaches this can cause in accounting have been a drag on the use of non-cash rewards in the past. Once the rewards management process is automated and not reliant on spreadsheets, the complete and accurate information required for withholding and reporting for income tax purposes is easily available to accounting departments, making non-cash rewards easy to track and audit as part of the overall compensation process.
  

Cash may be king, but its reign isn’t all encompassing when it comes to motivating behaviors in the call center, or anywhere else in business. When automated, aligned to strategic initiatives and integrated with CRM applications and your total compensation plan, non-cash rewards incentive programs can be just the thing to motivate and sustain exceptional behaviors.

Fortunately, the gloves are now off in regards to non-cash rewards—meaning you don’t have to rely on management-by-spreadsheets anymore. Parallel trends in enterprise mash-up technology, Web 2.0 standards, web services and on-demand software functionality have come together to enable all the automation, personalization, visibility and integration you need to create, deploy and track sophisticated and effective non-cash reward incentive programs. In doing so, and thus making room on the kingly throne for non-cash rewards, you greatly extend your mix of potential incentive options for optimizing call center performance and employee morale and loyalty.

Part II - Rewarding Behaviors: Motivating Call Center Staff Best Practices

Motivating Call Center Staff – Best Practices for Implementing Rewards Programs

Rewards have the potential to drive long-term strategic behaviors, increase call center productivity and combat personnel turnover. Non-cash rewards incentive programs in particular can be extremely compelling when wielded properly. They can be even cheaper than cash as a motivating tool (i.e., perceived vs. actual value). But it takes a consistent, programmatic approach to make non-cash rewards truly pay off on their full potential. And that takes the following best practices.

• Make it personal. You want the ability to personalize incentives by individual, skill level, staff type, job responsibility, etc. This is where non-cash rewards most clearly shine. A rewards point system on the front end, with points redeemable for a wide array of prizes (the wider the better) allow employees to self-personalize their program, honing in on the prizes that are most meaningful to them, whether it’s a riding lawn mower, designer purse, season tickets, or trip to Hawaii. Think outside traditional gift cards – they just fence you in.
• Make it obtainable. Many rewards programs fail because the people who need to be motivated the most often feel that attainment is out of their reach. Hence incremental attainment, with real-time visibility into where you stand, is the way to go. Dribbling out small cash payments can actually be de-motivating, but enabling employees to build up non-cash rewards points towards a goal or set of goals has just the opposite effect.
• Integrate with broader compensation programs/goals. Don’t let a rewards program exist in a vacuum – tie it to strategic objectives. If you are compensating variably for up-sell or cross-sell success, then use rewards to extend this strategy. It’s possible for a standalone rewards program to actually negate progress towards a strategic goal by drawing away agent efforts. So use rewards to reinforce, not dilute, your progress.
• Enable immediate selection and redemption of rewards. We live in a culture of immediate gratification, so why not leverage that to your advantage? Give employees visibility into the vast array of prizes they can win, and allow them the ability to redeem points whenever they wish. Let the Internet be your prize catalog and your redemption vehicle – it’s entirely possible.
• Make the process of winning rewards as important as the rewards themselves. You can come home with a raise in salary, but you’ll probably never hear the family say, “Great, now get out there and get another one tomorrow.” But you can come home with points towards non-cash rewards, and it’s a safe bet that someone in the family will encourage you to rack up more so they can “help” you redeem them. This is yet another aspect of the motivating power of non-cash prizes, and another reason to make the Internet your prize catalog.
  

A final and essential best practice for managing a successful rewards program is to automate the process. You can’t adequately apply any of the above best practices if you rely on spreadsheets and manual processes to track your program. Hence Part Three of this series focuses solely on how to automate while leveraging your company’s existing investment in CRM and performance management.

Non-Cash Rewards Can Help Your Company Weather the Economic Storm

Today human resources has the opportunity and the pressing need to get creative with pay-for-performance compensation. The Alexander Group, a sales-growth consulting firm, has forecast a modest 4-percent increase in incentive compensation pay for sales personnel this year. Companies, meanwhile, are getting serious about managing through the uncertain economy; buyers are watching expenditures; and sellers are looking for every bit of sales motivation they can muster. This dictates thinking outside the traditional incentive compensation “cash box” to counter the effects of the modest 4-percent raise with other rewards.

Non-cash rewards have proven effective in motivating employees to excel in all types of economies. And they have proven effective not just for the sales team, but other functions such as customer support, marketing and other specific corporate audiences. Non-cash rewards go where cash cannot in rewarding specific behaviors and creating a positive work environment. They provide greater agility anytime there’s a special opportunity such as rewarding up sell or cross sell, moving excess inventory in the channel, resolving customer-support cases, attracting prospects to marketing events, etc. The instant gratification factor of non-cash rewards also is attractive to many employees, particularly younger employees with little patience for annual or semiannual bonuses.

Read More at WorldatWork...

Part I - Rewarding Behaviors: Show them the Money… or a Trip to Hawaii

The Unrealized Potential of Incentives in the Call Center

Inbound or outbound, sales or service side, agent or supervisor: cash is king when it comes to call center compensation. Carefully calibrated cash-compensation plans – combining fixed and variable pay – certainly ought to be the bedrock on which to build a productive call center team. We all have to eat and pay the bills. But can cash by itself really overcome the challenges of inspiring top-flight sales and customer service behaviors, and retaining call center personnel?

Enter non-cash rewards incentive programs. Savvy call center managers know the power of contests and incentive programs, particularly in uncertain economic times like these, when base compensation is holding relatively steady. Many call centers have used contests with cash or non-cash rewards, recognition programs, or other incentives. And, again, cash rewards have their place in this scheme. But non-cash rewards – currently underutilized and undervalued – are what have the most potential to drive and motivate behavior.

Cash rewards can be seen as an extension of cash pay. In motivating group behavior, cash rewards can provide an excellent incentive. Cash is impersonal – we all like it equally. Non-cash rewards, on the other hand, can be highly personal and thus extremely motivating for individuals. That is, provided the individual truly wants the non-cash prize that is offered. This is just one point where non-cash rewards programs haven’t lived up to their potential. Too often, non-cash rewards programs have been boring, being limited to fixed-prize giveaways like gift cards (27 percent of which are left unredeemed, according to Consumer Reports!) or to one-size-fits-all prizes that don’t get everyone equally excited.

Another issue with rewards programs, cash or non-cash, is that they are rarely well integrated with companies’ overall compensation programs and are consequently more often tactical than strategic. That is, they are valuable as “kickers,” and for getting people to “stretch” to meet a short-term goal, but not ideal for molding sustainable long-term behaviors. How they are managed and tracked hasn’t helped either as management by spreadsheet (today’s standard method) results in dumbed-down contests that do little to motivate employees over the long haul.

But it doesn’t have to be this way. When liberated from the confines of management-by-spreadsheet and one-size-fits-all prizes, non-cash rewards incentive programs can go where cash compensation can’t. They can be personalized and highly targeted to specific individuals at any level across any call center audience (outbound selling, customer service, collections, etc.). They can be made not just more compelling but also “stickier” than cash, meaning that employees will be less likely to forget why they received them. They can play on the desire for instant gratification, in that they can be tied to points that can be immediately redeemed via the Web for merchandise, travel, entertainment, etc. And they can be integrated with strategic compensation programs and CRM applications to become a major driver in improving and sustaining call center productivity and combating turnover.

What it takes is a programmatic approach, resting on best practices and enabled by a level of automation similar to that provided by today’s ubiquitous CRM applications. Part Two of this series will examine these best practices, while Part Three will explore automation strategies and potential return on investment (ROI).

The Power of Linking Non-Cash Incentives to CRM

When it comes to incenting behaviors, non-cash rewards are typically under-utilized, yet they can be extremely effective in driving behavior in ways that cash compensation can’t. Cash is king, but cash is impersonal and predictable. Non-cash rewards, on the other hand, are extremely engaging when the prize is something that the targeted recipient truly wants and considers worth striving for. A vacation at the beach. An adventure package. Designer fashions. A day at the spa. That new set of golf clubs. The key is to let each individual decide what prizes motivate them the most – call it self-personalization – and then show them a way to attain them through their go-the-extra-mile actions. All-too-predictable fixed-prize contests don’t come close in their ability to engage desire and personalize motivation. And those gift cards? Twenty-seven percent of them are tossed away, estimates Consumer Reports.

So how do you leverage non-cash rewards effectively? There are several steps. The first is to automate their management. One reason today’s non-cash incentives are treated as one-offs and limited to fixed-prize giveaways is because they are tracked manually, typically in spreadsheets. Hence they have to be simplified. When you apply the same type of automation to tracking these contests as you do with tracking your sales leads and progress via your CRM application, you can start developing sophisticated, yet easily manageable, non-cash incentive programs precisely tailored for each specific audience or individual within the sales organization or across the entire company.

The next step is drive performance by delivering the widest possible selection of value-oriented tangible rewards. Give each person something personally meaningful to shoot for. Give them the ability them rack up points, with the points immediately redeemable for the prizes of their choice. This means leveraging the Internet for prize selection and points redemption, as well as for the power of instant gratification.

The final step is integrating your non-cash rewards program management with your CRM application. From a process standpoint, this provides the ability to tie actions to points automatically – for example, a lead becomes qualified, then points are automatically assigned and immediately viewable within the CRM application. From a visibility and instant-gratification standpoint, recipients and their management gain the ability to check earned and redeemed point balances at any time while logged into the CRM application, and instantly redeem their points online. And from an ongoing motivational standpoint, they can see how they earned their points, and how they can earn more.

We recently had a little fun in creating a video that promotes our Xactly Rewards product, which addresses the complexity of creating and managing an effective non-cash rewards program. Enjoy!