A Lesson On Why Individual Incentive Programs Don’t Work

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Winona, MN – Last month, I was shopping at a large retailer for a gift for my wife. My daughter and I talked to one sales associate briefly and she showed us an item we were interested in for my wife. We looked around at a few more items and then settled in on something other than the first item the sales associate talked to us about. At this point another sales associate was “hounding” us.

We decided to buy the item the second associate showed us and that is when the brawl started. The first associate started an argument with the second associate as to who “owned us” as a customer. Both of them were quite rude and totally oblivious to us. We both walked away from that encounter offended and quite uncomfortable. In fact, we almost didn’t buy the item because of their behavior. We might even have bought a few more items but we were so bothered by the encounter we left the store.

These two sales associates are in the dog eat dog world of incentive compensation – the “take no prisoners,” the “hell with the customer,” the “hell with what is right for the company” world. Just like the Wells Fargo debacle. As most people know by now Wells Fargo created 2 million customer ghost accounts just so they could make their incentive numbers. And when people are incentivized to make the numbers at all costs, they do dumb things. Like defrauding customers with accounts they didn’t ask for or in my case, offending and disturbing customers buying gifts.

Why I Hate Individual Incentive Programs

Individual incentive programs drive “micro-think” which is never good for the organization as a whole. In fact, the only incentive programs I like are ones that incentivize teams to work together. In the case of my shopping experience imagine how much better the situation would have been if those two sales associates worked together to get us to buy both of the items we looked at? Or if they worked together to upsell us on even more items? If those two were incentivized together they would have. Or even better, incentivize the whole department to work together.

Individual incentive programs are a dumb idea. If you insist on dumb ideas, be careful what you wish for. If you incentive people for individual results don’t be surprised when they don’t give a hoot about the good of the company. And don’t make the mistake of thinking individual results add up to big results for the company. They don’t. Synergistic results add up to big results. And the only way to get synergistic results is in teams. And teams won’t synergize unless they are paid to.

Four Ways Incentive Programs Will Work

1.) Eliminate all individual incentives. If you are using incentives because base pay is not up to market, bring base pay up to market before you do this.
2.) Incentivize the entire company on the only metric that matters-achieving the profit budget. The concept is everyone gets the goodies if the company hits the number but no one gets the goodies if it doesn’t.
3.) Once you’ve done this it will make a strong statement. But back that up with an employee wide meeting to tell people why you did it, and what new behaviors you now expect.
4.) Don’t give in to giving individual incentives to your rain makers. When the rainmakers have the same incentive program as everyone else, it will encourage them to teach their co-workers how to make rain.

As companies put together their goals and benchmarks for the future, consider implementing group incentive programs. You’ll have a more productive, efficient and invested team in 2017.

Steven L. Blue
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Steven L. Blue is President and CEO of Miller Ingenuity, an internationally recognized business transformation expert, media contributor, 5x-author, and dynamic keynote speaker. His expertise lies within transforming company cultures through innovation and investments in workforce growth.

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