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Monday, January 14, 2008

Punished by rewards?

Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A's, Praise, and Other Bribes is provocative and challenges many of the assumptions behind sales commissions and incentives in business.
I last published the article Punished By Rewards? in an early edition of the Construction Marketing Ideas newsletter (next issue will be distributed tomorrow). Then, in July 2006, the newsletter had a circulation of about 200, and my business was collapsing. Today, we're distributing approximately 2,000 copies of the newsletter, with increases each week, and the business is growing. (I'm heading to Sault Ste. Marie, Ontario to do the final pre-hiring interview of our new sales representative, who will, if all goes as I expect, be responsible for Northern Ontario Construction News.

At that time, I expected our sales representatives to work on pure commission -- now we offer everyone a fair salary to start. the people I interviewed in Montana and British Columbia ultimately did not join the business -- the candidate in Montana might have done well, but we couldn't commit to a (highly reasonable) salary requirement; the the poor candidate in Vancouver didn't score highly on sales evaluation tests and we should have not strung him along for several months while figuring out what to do.

But I think the message in this article is worthy of repeating, and (see below) I welcome your comments and observations about the points here.

Punished by Rewards?

This week, on an intensive three day trip from Ottawa to Vancouver, B.C. and Bozeman, Montana, I had plenty of time to read Alfie Kohn's provocative book: Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A's, Praise, and Other Bribes Right from the start, I knew this book would take some unconventional directions -- it is probably the first true business book (properly) catalogued by the book store in the Parent/Teacher/Education section. It is also a book that will not connect' with you if you oversee or work in sales area where pure commission compensation is the norm, you believe in B.F. Skinner's theories of behavioural psychology, or you are an ardent free enterprise believer in meritocracy. Of course, it may equally give you an 'aha' of unconventional but practical solutions to some of the most vexing problems of sales training and motivation if your business operates within any of these categories.
Kohn argues effectively that reward-based motivation, whether it be by bribes or manipulative praise, just doesn't work, at least for any length of time. He cites plenty of research that shows when you try to get people to do stuff that goes against their inner nature, you may gain co-operation, for a time, but you also create dependency, stifle creativity, increase conflict, and ultimately fail to achieve your objectives. His argument is that intrinsic motivation, that comes from within the individual's own interests and values, is far more important than extrinsic motivation; where the person is responding (through bribes and praise) to controlling or dominating authority.
Phew, this is something of a mouthful, but struck a chord as I waited for six hours in a rather unglamorous waiting area at Seattle airport for my delayed Bozeman flight. What in the world was 'motivating' me to fly across the continent to a small Montana city, to arrive at sunrise, get 90 minutes sleep, and then down to business discussing life in Zimbabwe?
Officially, of course, I had a practical business purpose for my travels -- I wanted to meet two prospective regional construction newspaper publishers (one in Vancouver and one in Bozeman) who, as expected, impressed me with their interest and talent. I hope I'm not guilty here in doing what Kohn describes critically as motivating by
praise. Those who know me well appreciate that my intrinsic motivation for this recently completed journey had less to do with any real business purpose than my deep enjoyment in being served by flight attendants in business class 30,000 feet above ground.
Kohn's point is that the best productivity and results are achieved by separating the money and rewards from the work, and giving your employees the freedom to express and respond to their intrinsic motivation -- to let them find their true happiness. Pay, he argues, should be equal, or at least dissociated from performance reward. He is quite convincing, though somehow I don't think this concept will get too far in a real estate brokerage office, or for that matter, most commission-based sales organizations.
Kohn cites one example where a business successfully abolished commissions and rewards and saw productivity and results soar, but I think the jury is out about whether he is overstating his case. I can give a contradictory example from first-hand observation. The business had prided itself on an egalitarian, salary based model, but (the owner discovered) he was losing all his best employees. Some, the high flying great producers, were going to competitors where they could truly 'earn their worth' on commission; others, the ones that were great at customer relations and maintaining rapport were (ugh) quitting his company to work for its clients! It is possible, of course, something else very wrong was happening at this business to drive the talent away; but I think it is equally possible that Kohn's model, where rewards are abolished and egalitarianism is the basis of the business, is fundamentally unstable and unsustainable over time.
On the other hand, I recall well in my earlier days in business the artificial sales contest and awards presentations I covered for my little newspaper serving the real estate industry in Ottawa. I thought: "Could these people really enjoy sitting at a banquet eating rubber chicken and learning that some of them were being 'honored' with a group vacation at some mass-market resort?" I mean, the last place I would like to take a vacation, I thought, would be with a whole bunch of other real estate agents from my company. And I certainly wouldn't feel good if I 'missed out' because I wasn't 'good enough". Yuk. Since the real estate brokerage was paying for the advertorial, of course, I wrote a positive story about the event.
I've seen in my own business how treating employees and contractors with respect, and allowing them as much freedom as possible to live and define their own approach to business, has given our enterprise surprising resiliency and sustainability, even in circumstances where the enterprise is struggling. While we haven't been 100 per cent effective, we have I think done a pretty good job in creating an environment where non-sales employees find meaning and satisfaction in their work without a need to bribe them with 'performance pay'.
But while Kohn makes a convincing argument, I am not sure if we should rush to embrace his approaches for the sales department. Rather, it seems to me, we should do our best to find salespeople and local publishers who are a good match for the organization and its values and, where possible, allow them the entrepreneurial freedom -- and rewards -- to reach their intrinsic levels of interest and potential.

Questions for you to consider (if you wish, reply by email or enter a comment):

Assuming the business treated you fairly and honorably, and gave you the freedom to excel using your talents, would you accept an environment where the business ended compensation bonuses and commissions based on individual performance?

What do you think are your intrinsic motivations? Have you ever thought about what parts of the work you enjoy the most, and would like to do more of -- regardless of compensation?

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