They (researchers) found that hating your job may run in the family (let's see an incentive program handle that.)
But why not just click over to our "Compendium" and read them yourself?
The compendium is a collection of the things we've seen in and around the web that we found interesting and noteworthy in the incentive world and we think you might like it too. You don't need to do the work - we're already doing it so just piggy-back on our stuff. We don't mind. Really, we don't.
See ya soon with another compendium...
BTW - can you believe it is September already! Wow.
Compendium Sources
FYI - we are always looking for new sources of information so feel free to let me know if you have blog or a site that you think we would find interesting. If so - we'll subscribe and see if there is stuff that should be included in the next go-round.
Be warned - if your feed is set up to only push out a teaser paragraph or an excerpt it gets bounced. We won't spend the time to click out and give you link juice when you could be thinking about your readers and provide the full feed. And FYI - most people who subscribe in a reader feel the same way. Open up the feed kids - information wants to be free!
I only ask for 5% of revenues when this idea is built. And it will be. By me or someone else ‘cuz it’s brilliant, infinitely doable, cool, and did I say brilliant?
But like all great ideas I can’t take full credit. If it weren’t for @chrisferdinandi and his blog "Go Make Things" I wouldn’t have thought of this the other day.
Chris uncovered an application using QRCodes, built by Tesco Korea (big global grocery company) that is simply brilliant as well. (I’m using brilliant a lot lately – makes me sound British, no?) From his blog...
"Tesco recreated an entire grocery store with signage in Korean subways. The layout and items were identical to those in their actual stores. Each item was labeled with a QR code. People waiting for their train could simply scan the QR codes to add items to their list, and have them delivered while they ride the train."
Also on his site is a video of how it works. It is, have I said, brilliant?
What’s in Your Catalog
So I’m thinking... one of things every incentive company deals with is developing a catalog for award point redemption. In the past it was paper-based and supported by a big staff of buyers and designers and printers. Back in the day we'd actually have catalog wars – “mine is bigger than yours” fights and delays in launching to see if we could get a copy of the competitor's catalog and make ours bigger and badder. We spent a lot of money on those things ($1 Million plus.) Then the internet came along and everything went online. Then Amazon.com got in (and then back out quickly) which changed our idea of what “lots of items” meant and now if an incentive company can’t say they have “millions” of items – well – they are just pikers aren't they?
But what if---- what if you could build your own individual and personal catalog simply by using the barcode scanner on your smart phone?
You can use both QRCodes and Barcodes - there already are apps that scan the barcode and then tell you the price of the item at different stores so this is not a stretch.
Think about it. Shopping in Kohls and you like that shirt? Whip out our smart phone – punch the “My Catalog” app and up pops your barcode reader software, takes a picture of the item/bar code and uploads it to your personal online catalog. As you earn points in your program (and this could be employee, channel or consumer) your app reminds you of what is in your catalog at various point levels and as you hit those levels it asks if you want to order it. If you say yes... then automagically (I’ll admit I don’t have this all worked out – but hey – I never said it was VC ready) behind the scenes the item is ordered and shipped to your house/work/mistresses' condo.
So... whadda ya think? Should I start looking for retirement homes in France?
I know we think autonomy, mastery and purpose are great – but what’s really great is setting goals (internal AND external) and working toward them and receiving the reward WE WANT when we hit those goals.
I think it is brilliant (I know, again.) But I think chip bag clips are the smartest thing I’ve seen in a while too...
PS... just to be trendy - we could also put a social sharing app in this that let's other people in the program see what you have made public in your catalog so they could add it to their catalog or share info on the item if they already have it (kind of a +1 for awards). Okay, now maybe it's 10% of revenues.
Hit me in the comments on via email and let me know when to expect the checks.
But, prepping for that presentation made me think of the whole incentive program goal setting process.
Typically it goes like this...
ACME Widgets determines its sales goal for the year. Say it is 120% of last years’ sales. They go to the Sales VP and tell him/her the goal. The Sales VP calls the incentive supplier and tells them they need an incentive program to drive a 20% increase in sales. The incentive company comes back with a program design that:
A) Sets a sales target of 90% of the 120% goal (approximately 108% of last years’ sales) and awards points for each sale from 90% of the 120% and then doubles the points after that level (btw - from a design standpoint – the company actually gets an 8% increase before awarding a single point;) or
B) Rewards everyone in the sales force that hits 120% of last year with a trip to Hawaii.
Those are the two basic options. Reward incremental sales in points driving folks to the 120% number or reward everyone who achieves this years’ goal (20% more than last year.) There are variations on the theme but the net-net is the program is designed to get the sales person to strive for the +20% figure.
Paying a Premium for Your Goals
The thing that no one seems to recognize in this scenario is that what the company is really doing is paying a premium to get the sales people to focus on the “company” goals. The 20% increase is not the goal of the sales person. Nowhere in the example did the sales person articulate what they wanted. The entire program is designed around the company needs, wants, desires and goals.
This is a lazy way to do the program. In effect, what you’re saying is...
"Here’s what I want – you go look in the catalog and decide what you want. If we’re lucky – what you want will add up to a 20% increase I want. If not, too bad.”
This is a lose-lose scenario. The company didn’t get their 20% increase and the sales person didn’t get what they really wanted either.
Because the company didn’t find out what their sales people wanted they are actually (IMHO) paying a premium through higher point rewards for sales effort in order for the sales person to shift their attention away from what the individual sales person wants, to what the company wants.
What If It Was About Them?
What if we worked backward on this (and I won’t take credit for this idea... it came from someone I worked with about 5 years ago)...
Ask each sales person what they wanted to accomplish this year. It could be to take a vacation with the fam to Disney, could be a new Harley. Based on their desires, goals, dreams – the Sales VP and the sales person worked together to determine what they would have to sell/produce to get that award. If it adds up to 20% great. If not – what’s the next thing on the sales person’s “to-want” list? Add that to the mix and put that under the first thing. Between the sales person and the VP, they will come up with a personalized list of goals (not the % kind – the personal kind) that, when taken in total across the sales force, will net the company their stated 20% growth figure.
Not each sales person needs to hit 20%. Some may hit 25% growth – based on their needs/wants/desires that year. Others, may only be in the 10% range. I won’t be so Pollyanna as to say you should reward folks for below 100% (unless there is some mitigating factor – like the economy!)
But here’s the kicker... I’ll bet my reputation and my fees on this...(if someone wants to take me up on it) the overall cost of the “wish list” will be lower than the cost of points and/or trips would be from a program designed from the goal “number” backwards. Why?
It has been my experience that people will set higher goals than the company normally does (remember – a lot of the time the number they hit last year wasn’t them at 100% effort – more likely 70% - and they know it.)
When the focus of the sales person’s goal is personal (not some company derived number) it is more desirable.
When someone has a say in the goal development they are more committed – it’s their reputation – not some no-name in Sales Planning or Finance’s reputation on the line.
It’s easy to test this theory. If you have a “points” program or other program in place, go to a few sales people, ask them what they really want, work together to see what they need to do to get that and compare the cost of that to the cost of the points/trip that would (will) be rewarded if they hit that number. Go do it – I think you’ll be surprised.
Does this process eliminate a catalog solution? Nope. The process simply translates a company goal in to a personal one BEFORE you start the program. That is the key influence technique. When the program is announced, the individual is given their list of “desires” – and you track against that list. At any time during the program, the sales person can adjust and manage their “wish list.” Remember – it’s THEIR list now - not yours. That makes all the difference in the world.
Being Impersonal Is Costing You Money
So ask yourself – are you paying a premium on your reward program just so you don’t have to talk to your sales people? If you’re running a program that requires sales people to determine their goals after you’ve determined yours, you probably are.
I’ve railed against some of the non-cash vs. cash discussions, stating they are red herrings designed to get you to buy one award over another in lieu of sound compensation and reward strategy. You know I believe that cash is one of the arrows within an employer’s quiver for driving behavior. You know I believe there is a place for cash. I like cash. I need cash (phone number and contact info at top of page btw...)
However, it is not always the right thing to do. Conversely – non-cash isn’t always the right thing to do either. You know I believe there are transactional and social relationships inherent in all working relationships and the proper use of cash and non-cash keeps those relationships in their place and keeps you from – as all good Ghostbusters know – crossing the streams.
And you know how I feel about “academic” studies that show a result that is then shoehorned into the real world of getting work done. Most of the time they can’t/won’t translate.
Now they just might...
Well – I ran into a study that does pretty much what I would have done had they asked me to run the study. They used a real-world situation, they tested cash, non-cash and non-cash with a “value” assigned to the award. They looked at both the behavior of the subjects in the experiment as well as their opinions via a survey (action versus intent.) The only thing they didn’t do was put it in an “incentive” context. It was more of a “recognition” context (all you Dan Pink fanboys get ready – right up your alley!) In their terms “a surprise gift.”
But let me give you the background and results and then you can go read the mind-numbing statistics yourself.
It started with this article on Slate titled: “Raises Don't Make Employees Work Harder - But pay cuts make them slack off.” The article references a study conducted to see if pay increases actually impact performance – and if pay cuts hurt performance. The study really ended up boiling down to “Is it better to cut pay or cut people to save costs.” The net-net is that pay increases only positvely affected performance for a very short period, but pay cuts hurt overall performance. They arrived at the conclusion that in order to maintain current levels of productivity it might be better to lay off workers than cut pay across the board to get the same savings.
My concern with their conclusions is that the study explicitly stated that the cuts were completely without explanation. In other words – they didn’t tell the employees why they cuts to pay were being made. That is a huge flaw in the study and one I’d keep in the back of your mind as you read the results. Context is everything. I’d take that study with a grain of salt...
but...
That’s not the good part...
The good part is they reference a study conducted in February 2010 (one of the most recent I’ve found) that talked about performance and the use of cash and non-cash in a real-life situation called “The Currency of Reciprocity - Gift-Exchange in the Workplace”.
"What determines reciprocity in employment relations? We conducted a controlled field experiment and tested the extent to which cash and non-monetary gifts affect workers' productivity. Our main finding is that the nature of the gift, not its monetary value, determines the prevalence of reciprocal reactions. A gift in-kind results in a significant and substantial increase in workers' productivity. An equivalent cash gift, on the other hand, is largely ineffective even though an additional experiment showed that workers would strongly favor the gift's cash equivalent." (emphasis mine.)
Read that again... cash was less effective even though workers preferred it. Is it Groundhog Day on the this blog?
Their premise:
"We hypothesize that, unlike a wage increase, non-monetary gifts or gifts in-kind provide a more salient signal of kind intentions and therefore represent a superior mechanism for the establishment of successful gift-exchange relations. In comparison with money, gifts in-kind are often considered to be more thoughtful and to more credibly reflect regard."
Meaning – non-cash communicates emotions and social contracts – not transactional ones. And that is double-plus good.
The Experiment...
In a nutshell they measured performance under three set ups... cash increase, gift of a thermos (wrapped as if it were a gift – that’s important) and a gift of the same thermos while communicating its monetary value (that’s for all you trophy-value folks...)
Highlighting some important quotes from the study:
"The results show that the nature of gifts crucially determines the prevalence and strength of reciprocal behavior. An increase in fixed wages has no significant impact on workers' productivity. However, a gift in-kind of equivalent monetary value has an economically and statistically significant effect on productivity. Workers provide 30 percent more output on average. Moreover, this effect remains large and significant over the course of the entire working period. In contrast to all existing labor market field experiments, the elasticity of output towards the change in fixed compensation is remarkably high with 1.54, emphasizing that productivity gains exceed the relative increase in labor costs. We replicate the results with our additional control treatment where we explicitly communicated the exact monetary value of the gift. Treatment differences thus cannot be explained by systematic overestimation of the monetary value of the gift."(emphasis mine.)
So all you gift card haters read that again – when the value of the gift was communicated it had no statistical difference in affect. For those of you on the “trophy value” side of the equation – booya! A gift card (a gift with a monetary value) is as effective (in this study) as a gift with no communicated value.
Aaaannnnddddd.....
"In addition, our results suggest that a higher share of perks in the compensation mix can be profitable for the firm because workers are more likely to reciprocate positively to the receipt of perks."
Plus... as I’ve said a million times – what we get on the survey’s isn’t what we see in behavior....
"Despite this strong preference for cash, the gift in-kind has a substantially stronger effect on workers' productivity than the cash gift. This suggests that the monetary value of the gift is of lesser importance than its signaling character."
It’s About Context
To me this signals a huge leap forward in the analysis of incentives and rewards in the workplace. It shows me that there is proof that workers will say one thing and actually behave differently.
It says that compensation establishes the transactional baseline for a job and that awards create a more social and emotional connection which drives behavior.
It also tells me that the process – how you give the award – is critical in how the employee assigns value. If you just dump it in with their pay – you stay on the transactional side of the equation and get nothing for the effort. If you separate it out and provide a “moment” where you recognize and reward – with something other than “pay” – you get a much different – and much more effective result.
Granted they do cover their butts at the end of the study (but what study doesn’t?) when they say...
"While our results show that a non-monetary gift is more likely to increase workers' productivity, it would be premature, however, to conclude that higher wages are generally not able to trigger reciprocity. Given that higher wages are communicated in a relatively neutral manner in our experiment - as well as in Gneezy and List (2006) and Kube et al. (2010) – future studies examining whether there is potential scope for increasing perceived kindness by choosing a more affective framing might be worthwhile. Such framing could render the gift-character of the wage increase salient."
I just checked – this is post 753 for our little blog. Averaging 500 words that’s 376,500 words (including this post) about incentive, rewards, recognition, influence and behavior. While that can’t compete with War and Peace (560,000 english words) or Gone With The Wind (423,575) it does double the count in the Bible (New Testament - 180,552.) That’s a lot of words.
I can't comment on the quality of my words – especially in the context of those other tomes. But I can say this with complete certainty – 99% of the words on this blog were not about selling our services.
They were about helping you understand how you can better influence your audience.
The document (a lot less words than on this blog) is a summary discussion of the input from a Delphi Panel of industry experts and research sources focused on the “evolving body of knowledge regarding the use of incentives and recognition programs to motivate today’s workforce.”
I bring this to your attention for two big reasons...
I was on the Delphi Panel and provided some input into the process (quoted on page 15 of the study by the way.)
They arrived at the same place this firm started three years ago.
And that place is...from the paper, under Conclusions...
"There is little doubt that incentive program design and implementation, including measurement and ROI, is critically important in today’s workplace environment. And while the incentive plan designer must consider the overall context, including the type of worker or team they are attempting to motivate, it is far from agreed that in designing an effective rewards program ─ even for knowledge workers ─ that one or the other of intrinsic or extrinsic, contingent rewards must be used. We are seeing the evolution of an effective blend of both, or a more inclusive approach of any appropriate reinforcer that is contingent, valued, and top of mind.
What is clear from our research, including the opinions of the great majority of our experts, is that incentive, reward and recognition programs must be more tailored today than in the past. Careful design must make allowance for the many different ways in which workers are motivated."
(emphasis mine.)
To net that down for those of you in Rio Linda – design is the key element of program success. Not the toaster, not the trip, not the gift card, not the logo-identified whizzy-whig.
The design.
And design is what we do – without regard for the award (if there is a need for one at all.)
.
Go For The Green
Therefore, to honor St. Patrick – I’m promoting our services – going for the green so to speak.
We analyze and design incentive, reward and influence programs with your goals, objectives and outcomes in mind. We do it via an unbiased approach. We don’t worry about what kind of award (again, if any) is attached to the design outcome. Pure design.
If you want the same thinking we provided the Delphi Panel applied to your organization – call, write, stop by. We’d love to help.
And by the way – overall the document is a well-researched and good summary of what you need to consider when designing an incentive/reward strategy. It gives equal time to incentives – and equal time to Dan Pink/Alfie Koh/Deci et.al. – folks that may not always agree with me. So you got that going for you.
I’ve posted a few times on service anniversaries and if you’re a regular reader you know I’m not a big fan. I think they represent the Henry Ford era of recognition and should be unceremoniously relegated to the dust bin of HR practices.
Some folks disagree with me. (Can you believe that?)
Rather than bury this disagreement in a two-year old post I’m bringing it to the forefront here for further discussion.
Below is the comment on a post I did January 1, 2008. I provided my responses “in line” below each of the commenter’s, well, comments. (I apologize, but for some reason some of the links in the original post are no longer valid and the Magazine article I reference is no longer on their servers. But I repurposed the article here so feel free to download and take a look...)
On to the comment:
“Wow, is this anything like saying to your wife or significant other, "Honey, since most marriages end in divorce, I have decided to not give you any anniversary gifts. And since everyone eventually dies, let's forgo birthday celebrations too. Instead whenever you meet arbitrary goals I set for you, I will take you to a concert, or even better give you a $25.00 gift card to some random store at the mall."
No... I’m not saying that at all. I am saying that if you treat your wife like crap for 364 days each year handing them a gift on the 365th day is a worthless and demeaning gesture. I will say that most marriages might end in divorce BECAUSE they think an anniversary present is the MAXIMUM one should do to celebrate a marriage.
Really, is that how you see service awards? Has it ever occurred to you that a lot of younger generation workers aren't staying with companies because of the lack of appreciation!?!
Yep... they are leaving because a lack of appreciation – on each and every one of the 364 days they don’t get feedback, validation, recognition, direction, guidance and support. So, yes, you are right – but you are totally wrong. That one event every 364 days is not what they are looking for. The lack of one event every other day is why they are leaving and simply lumping them all into one small event every year doesn’t make up for the dearth of recognition the rest of the year.
I am not saying the service award program is the end all, be all. BUT it is an important part of any organizations tools of appreciation.
No. It’s not. It is A tool. And not that important a part. I’d suggest of all the reward options available to company to recognize employees it is the weakest. It is in reality – the easiest award to earn. Think about it. To stay with most companies you need to keep your head below the log and hope you don’t get noticed – either for good performance or bad. People who stir the pot and look for ways to change the company are many times seen as disturbers and they need to be removed. Those that work below the minimum – they get bounced too. What’s left are those that stay firmly in the middle of the pack. Neither great nor good. That’s what most service anniversary program reward.
The key to any successful program is how it is presented and the meaningfulness of the award. Companies can find out what is important to their most valuable asset by giving them a choice of what they would like. Including a token that is representative of the company helps tie that accomplishment to the organization.
Yeah... keep making the choice for your employees and see how many really, really, really like that crystal vase or lapel pin (lapels – what are they again?) And what is the value of that choice each year? Typically it is determined based on the IRS tax code for the maximum allowable deduction - not the value of the contribution. Check it out - you'll see. Most companies determine the award value based on what they can write off. That's recognition at its finest.
These are parts that help create a culture of appreciation.
Thank you.
You're welcome and yes they are part of a culture of recognition. Unfortunately, the worst part.
If the commenter had really read my post carefully (or not so carefully) he would have seen I recommended that service anniversaries be augmented to include growth along with time. I wasn’t ignoring time with a company – I was simply saying that time isn’t good enough anymore.
Time and growth are the criteria. Combine getting better not just getting older.
A recent article from strategy+business (magazine by booz&co) added another generation to the already crowded room that includes Gen Y, Gen X, Generation Jones, Boomers, and Gen Z.
They are coining the term Gen "C."
Gen C is (to steal shamelessly from the article):
"We call them Generation C — connected, communicating, content-centric, computerized, community-oriented, always clicking. As a rule, they were born after 1990 and lived their adolescent years after 2000. In the developed world, Generation C encompasses everyone in this age group; in the BRIC countries (Brazil, Russia, India, and China), they are primarily urban and suburban. By 2020, they will make up 40 percent of the population in the U.S., Europe, and the BRIC countries, and 10 percent of the rest of the world — and by then, they will constitute the largest single cohort of consumers worldwide.
This is the first generation that has never known any reality other than that defined and enabled by the Internet, mobile devices, and social networking. They have owned various handheld devices all their lives, so they are intimately familiar with them and use them for as much as six hours a day. They all have mobile phones, yet they prefer sending text messages to talking with people. More than 95 percent of them have computers, and more than half use instant messaging to communicate, have Facebook pages, and watch videos on YouTube. Their familiarity with technology; reliance on mobile communications; and desire to remain in contact with large networks of family members, friends, business contacts, and people with common interests will transform how we work and how we consume."
So there you have it... a new generation, a new problem, a new opportunity.
The s+b article goes on to highlight the various impacts Gen C will have on the world but they left out the most important impact IMHO – the impact they might have on incentive and reward programs.
So here’s my prediction (and please remember – predictions are tough, especially about the future):
Impact of Gen C on Incentive and Reward Programs
Go Mobile or Go Home:
By 2020 80% of the world will be on mobile phones. Running an incentive and reward program – better have a mobile format ready to go. Or an app. You choose, but yesterday’s big, slow, lumbering website won’t cut it.
Travel Awards Become More Valuable:
As we connect more and more on the wires, face to face will be more and more scarce. The increasing costs of travel will also make it less attractive than virtual meetings. When things get scarce they get desireable.
Awards with No Internet:
Travel awards featuring internet disconnect may be popular. Since Gen C will always be connected, time spent unconnected will also be scarce. Awards that provide a disconnected experience may be more important to Gen C.
Award Redemption will Need to Mirror Retail Activity:
From the article... “Ubiquitous connectivity will continue to transform the retail industry, seamlessly integrating the online and offline worlds, and ultimately leading to a form of augmented reality that allows a more elaborate presentation of retail goods.”
Will your reward options be ubiquitous? Will the fit the expectations Gen C has of their “shopping” experience requirements? If you are 2000 and they are 2020 – will they even stop by your store?
Recognition and Reward Networks Go Social:
The article states that ... "Even within the family, the need for physical proximity will be reduced through increased digital interaction. Just as Facebook’s “Connect” buttons are already distributed across 80,000 websites and devices, social networks will accompany people throughout their daily activities.”
How are you integrating your reward and recognition efforts into your participant’s ever-expanding social web? (for a sneak peak check out my webinar tomorrow on Recognition 3.0)
More Digital Information:
As our participants interact more and more online, with and through the channels incentive companies create, what will you do with that information? How will you use that information to design better programs with better results with more connection to the individual? If you’re not thinking about the information that exists in your programs you’ll be thinking about closing your doors.
Less Hierarchy – More Virtual Teams:
Designing incentives for teams has always been difficult. But if the future is close to what the articles says it is – team-based will be the predominate form for incentives ... “As 24/7 connectivity, social networking, and increased demands for personal freedom further penetrate the walls of the corporation, corporate life will continue to move away from traditional hierarchical structures. Instead, workers, mixing business and personal matters over the course of the day, will self-organize into agile communities of interest. By 2020, more than half of all employees at large corporations will work in virtual project groups.”
Not to mention that top-down objectives may go the way of a screaming AOL connection if the teams are setting their own goals and objectives. How do you design for that?
I do know this... it will be different and incentives and reward programs will need to adapt... to pull the closing paragraph from the article:
“Executives must begin now to develop an agenda that includes an analysis of the capabilities and workforces they will need in the next decade and beyond. A critical step will be to make sure that the organization as a whole understands the coming changes, and that there are already people within the organization who are living these changes now, who don’t perceive them as a threat, and who can help integrate them into the organization’s business plan.”
I agree – start asking people how to do this stuff and be prepared.
Had a couple of discussions lately about “points-based programs” and thought some of the conversation might make for interesting reading. No particular point to this post other than to share some info and hopefully get some commentary.
Incentive Companies Sell Points
As you know (or may not know) but points-based programs have been the staple of most incentive companies for going on 80 years or so. They were the incentive version of the old “stamp” program. Each “behavior” or result is worth “X” points. Do the stuff and get the points. In the old days participants would actually get “point checks” in the mail which they would send in with their award order. Nowadays it’s all electronic. Just like a cash checking account – participants have a balance and order online and their point account is deducted by the amount redeemed. Piece of pie… easy as cake.
Billing on Redemption or Billing on Issuance?
For years the incentive industry sold “points” – they were worth roughly ½ cent. So 200 points = $1.00 (you’d be surprised how many newbies just couldn't do that math.) As points were redeemed, they were billed to the client. So, if you were the client and in November 100,000 points were redeemed, you got a bill for $500 (200X$500 = 100,000.)
All was good. You only paid if someone redeemed. You could issue all the points you wanted. You only paid for those that were converted to awards.
That makes a lot of sense to me. You pay for the awards right?
There are other incentive companies that sell from a position of “pay for performance” meaning they bill the client for points earned by the participants - not redeemed. In this scenario points become the proxy for performance. The point being if someone earned the points – the client got the performance (which is what they wanted right?) and the incentive company can collect for those points issued. This actually makes a ton of sense to me too.
So it makes sense to bill for redemption and it makes sense to bill for issuance. Your call on that one. I can see both sides of the argument.
That, in incentive industry parlance is, “breakage” (or some may say shrinkage.)
If you bill on issuance then you receive money when the points are earned and have that money in-house sometimes for 12 months before someone redeems for an item. That’s a long time to have someone else’s money in the bank earning interest.
If you bill on redemption – you don’t realize any income (‘cept for services) until someone redeems.
Now fast-forward 12 months
A bill-on-issuance company may only see 80% of the points issued actually redeemed. That means 20% of the points billed for are 100% profit. Who’s money is that? Most clients would say it is theirs. But remember – they’re paying for performance not awards. Points are just a proxy for performance. Many incentive companies feel that is their reward for getting “lots ‘o performance.
Same 12 months into the future and a bill-on-redemption company sees only 50% of the points redeem. They’ve run a program for 12 months with an expectation of say $1,000,000 and they are only seeing $500,000 in points redeemed. Does the client pony up the extra $500,000? Not very likely. The incentive company takes the hit (which is one reason awards are a bit higher than traditional retail btw.)
Enter Mr. Taxman Just to Make It Interesting
Over the past 10 years or so the IRS has gotten a bit aggressive on point programs and has indicated that points earned in a program (whether redeemed or not) are considered income and need to be accounted for in either a 1099 or W2. Not a big deal – most incentive companies can handle that reporting very nicely.
Now the IRS rules can be “interpreted” and many companies do. They decide that the IRS really doesn’t mean “earned” they mean redeemed and therefore only report W2 and 1099 on redemption. I’m not a tax expert and I’m surely not one to argue with the IRS – some folks feel pretty strong and want to go toe-to-toe. You be the judge if there is wiggle room (link to IRS Pub 525.)
To Redeem or Not Redeem
Bill on issuance companies are pretty happy with non-redemption (increases the number of 100% profit points.)
Bill on redemption companies want everyone to redeem everything – that's the only way they get revenue.
But in both cases the participant will most probably be taxed on their award EARNINGS.
So… did the person earn an award at the time of issuance (as the IRS says and bill-on-issuance incentive companies)?
Or is the award earned at the point of redemption?
Did you get paid if you didn't cash your paycheck?
It’s the week of Thanksgiving. Meaning there are fewer days of work but the same amount of work.
Tough week.
Because of the reduced “hours” and not-so-reduced “work” something get’s compressed and that something is this blog.
Today- three ideas – writ short – to compress the work. Hope they make sense in their concentrated formula.
My Conference Schedule 2011… #HRevolution and FOT
Asking questions. Listening to answers. Hearing new points of view. Not talking. Letting conversations evolve. Hearing contrary points of view. Hearing questions from non-experts who just want truth – not sales pitches. Being with people that have a passion for their profession. Watching people actively work on being better at their job and as people.
Those are the things that I want from my professional get-togethers.
That is the oxygen that drives my curiosity and my recommendations to clients.
I urge all my subscribers and anyone who happens across this post to check out their respective sites. If you’re a practitioner in HR – these two conferences will change your life. #FACT.
If you’re in the incentive industry and you’re reading this – you should attend to hear the truth about what is on the minds of HR professionals.Be a sponsor – throw in some dollars and then throw in some time listening. You will be a better company for it in the long run.
Our Legislative Branch – Rewards and Punishments Out of Whack
The recent Charlie Rangel debacle got me thinking. Here’s an elected official to one of the highest levels of our country’s political hierarchy accused of 11 counts of “ethical wrongdoing” (what a euphemism) and the "punishment" is reprimand? Really - "reprimand"? I guess staying after session and clapping erasers was too harsh.
This isn’t a comment on Rangel personally – it is a comment on the disconnect between rewards and punishment.
Here’s my point – when the rewards of a job (like those for Senators, Congress people, President) are large – good salary, good benefits, cars, expense accounts, free mail – can you say Franking Privileges – the punishments for violating trust in that position should be commensurate. However, when the punishment is “reprimand” it seems a bit out of whack to me.
From my experience, the entire equation in corporate America is backwards – the punishment for those at the bottom of the hierarchy are very stiff (mostly getting fired – which is a very big hit) yet the rewards are pretty pedestrian. Compare that to the perks at the top of the pyramid which are typically are excessive and the punishments are at best – inconvenient but hardly damning.
In a well run organization shouldn’t the reward/punishment thing be a bit more balanced? Check your own company… do the top dogs get more good stuff and much less bad stuff? I’m guessing yes.
To me an elected official in our top levels of government who is found guilty of 11 counts of anything bad should be shown the door with their box of personal effects in their arms – including that dying plant and their red stapler. Just sayin.
Cash Motivates
I’ve seen a few more posts on some of the Linkedin Groups I follow with more of the “cash don’t motivate” spam coming from providers of merchandise awards. They lump gift cards into that pile since they have dollar denominations on them.
For those that believe that – it’s crap.
Cash motivates just fine. In fact too much. And that’s the problem. Any provider that says cash don’t motivate – check their grammar and then check them out. Cash is an effective motivator if applied correctly (which it rarely is outside of compensation.)
"The study, published in the Journal of Neuroscience, identified a brain region about two inches above the left eyebrow that sprang into action whenever study participants were shown a dollar sign—a predetermined cue that a correct answer on the task at hand would result in a financial reward.
Using what researchers believe are short bursts of dopamine—the brain’s chemical reward system—the brain region then began coordinating interactions between the brain’s cognitive control and motivation networks, apparently priming the brain for a looming 'show me the money' situation.
'The surprising thing we see is that motivation acts in a preparatory manner,' says Adam Savine, lead author of the study and a doctoral candidate in psychology at Washington University in St. Louis. 'This region gears up when the money cue is on.'"
Cash is a fungible reward mechanism in our society. Get over it and get on with it.
There are many situations where cash and money are appropriate awards – there are even more situations where it is not. That’s the key folks – right tool, right time.
Don’t take a merchandise or travel salesperson’s word for it – their goal is to sell stuff and they don’t sell cash.
So that’s your Thanksgiving Melange…
Be safe this week and I hope you all connect with family and friends and remember that is the absolute best reward you can get.
If I had a penny for each time I’ve heard an incentive company say they are award agnostic I’d be very rich and very hard to live with (F-U money does that to some people – I’m thinking I might be one – but I’ll never know.)
Most incentive companies use that term to describe their approach to awards. They believe that by saying they are award agnostic it gives their clients the impression their reward program recommendations are somehow unbiased and more effective. Nothing could be further from the truth.
I Do Not Think It Means What You Think It Means
In the movie The Princess Bride Vizzini keeps applying the word “inconceivable” to situations that are in fact actually happening – making them by default “conceivable.” At one point in the movie Indigo Montoya says to him –
“You keep using that word. I do not think it means, what you think it means.”
But in reality I’m a stickler on saying what you mean and meaning what you say. In this case there is a big difference between what the incentive companies say and what they mean.
Define Agnostic
For those of us from Rio Linda – the real definition (from Merriam/Webster online dictionary) of agnostic is
1 : a person who holds the view that any ultimate reality (as God) is unknown and probably unknowable; broadly : one who is not committed to believing in either the existence or the nonexistence of God or a god
2: a person who is unwilling to commit to an opinion about something <political agnostics>
Now – let’s apply the real definition to the statement “award agnostic” (which by the way, is now in 2nd place in the incentive sales person’s repertoire, right behind – “you only pay for performance.”)
“We don’t know if awards exist or not.”
Or… “We cannot commit one way or the other on awards.”
I don’t know about you but if your incentive company can’t decide if awards exist or are unwilling to commit to awards – then I’d be looking for another company.
So what do they really mean?
They really mean...
“I’ll try to sound smart by using this word ‘agnostic’ and hope you think it means I only care about your program design and not about my commission or my company’s P&L. I really hope you never look up the word ‘cuz I didn’t. I just heard it in a webinar a few years ago and it sounded really, really, cool.”
Not Agnostic – Just Indifferent
I don’t think they care. I think incentive companies by and large only believe in what they can charge for.
More money = More belief.
The reason I think incentive companies are indifferent is that most have a variety of award options from merchandise to gift cards to travel. They have a quiver with a bunch of options readily available to you the client. They pull out the award that (in order of importance…)
1. You like
B. They make the MOST money on
Third: They make any money on
If an incentive company doesn’t offer a particular award – say gift cards – they simply either can’t make money on it or they can’t figure out a way to make enough money on it. If a company only offers a specific award - say gift cards - then they have found a way to deliver those awards as efficiently as possible and have a price advantage over their competition. At least I can get behind that point of view. At least it’s honest.
Here’s my take… by positioning themselves as uninterested in the award type – and wrongly using the word “agnostic” - they hoping they communicate that they are providing unbiased and valuable recommendations.
They are not. (See the list above.)
I AM NOT AWARD AGNOSTIC!
I’ve had people describe I2I as award agnostic. We’re not.
We believe awards exist.
We believe very strongly in awards. We are Gnostic.
We just don’t make any money on them ‘cuz that’s not what we sell.
We believe that there are varieties of awards – and they all have different purposes and applications. Truth is - when you take the money out of the award equation you get a much better recommendation.
Remove the incentive and you remove the behavior.
Next time you talk with your incentive sales person ask if they are award agnostic. They will say “Of course!” Then ask them why they are so uncommitted to what it is they sell?
They won’t know what hit them.
For the record…
Once again…
We are NOT award agnostic.
We’re very much in the “believer” category when it comes to awards.
If you call us then between the two of us we’ll determine the best award (Or if it is even needed. Now that’s something you won’t hear that from our agnostic friends.)
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