Hacking Sales Comp Using Behavioral Science Insights
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Keynote presentation on using Behavioral Science to improve incentive compensation and rewards
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Hacking Sales Comp Using Behavioral Science Insights
- 1. ©2020 WorldatWork Hacking Sales Comp: Getting The Most From Your Sales Programs Using Insights From Behavioral Science Kurt Nelson, PhD – Founder, The Lantern Group & Co-host Behavioral Grooves Podcast
- 5. ©2020 WorldatWork 4 Behavioral Science helps us understand HOW & WHY
- 6. ©2020 WorldatWork 5 But why should we CARE?
- 7. ©2020 WorldatWork 6 85% 85% of employees are disengaged (Gallup)
- 8. ©2020 WorldatWork 7 35% Costing employers 35% of employee’s salary
- 9. ©2020 WorldatWork 8 APPARENT PROGRESS SENSE OF PURPOSEBARRIERSTO ENGAGEMENT INTRINSIC MOTIVATION SENSE OF AUTONOMY
- 11. ©2020 WorldatWork 10 DESIGN • Tap into multiple behavioral drives • Create sense of progress • Provide feeling of autonomy
- 12. ©2020 WorldatWork 11 The 4-Drive Model of Employee Motivation Bond & Belong Acquire & Achieve Challenge & Comprehend Define & Defend Ensure that your total rewards tap into all four of the drives – not just Acquire &Achieve Lawrence & Nohria
- 13. ©2020 WorldatWork 12 The Progress Principle Asense of progress is the single greatest factor to engaging employees, creating high functioning teams, and providing on-going motivation. How progress works Small wins matter Big wins inspire Set-backs / status quo demotivate Teresa Amabile
- 14. ©2020 WorldatWork 13 Self-Determination Theory We are motivated to be causal agents of our own life and decisions. We seek to feel competence, relatedness, and a sense of autonomy. Motivation Autonomy RelatednessCompetence Deci & Ryan
- 15. ©2020 WorldatWork 14 COMMUNICATIONS • Frame messages correctly • Use achievement words • Build stories to gain emotional appeal • Add in visualization
- 16. ©2020 WorldatWork 15 The Framing Effect How a communication is framed impacts how it is understood and acted upon by employees. 15% Discount 15% Penalty 67% 93%
- 17. ©2020 WorldatWork 16 Achievement Words Our choice of words matter, positive, achievement-oriented words can prime employees to be more productive and motivated. Prevail Accomplish Compete Strive Triumphed Achieve Mastered Win Success Gain Attain +15% Performance +35% Efficiency Latham
- 18. ©2020 WorldatWork 17 Emotional Contagion Emotions are contagious and are best developed by creating powerful stories that highlight human situations. “Ramone is a hard worker and each year he strives to earn the President’s Club Trip! He is out on sales calls at 7:30 AM and has great rapport with his clients. He knows the products by heart. But his sales are flat. That is until he started to…”
- 19. ©2020 WorldatWork 18 Visualization We remember and are more influenced by vivid visualizations than we are by words alone. Success feels wonderful!
- 20. ©2020 WorldatWork 19 Understanding behavioral science can help you create and implement better sales programs!
- 21. ©2020 WorldatWork 20 What Can I do? • Learn about behavioral science: books, videos, podcasts • Conduct a behavioral science audit: look at your IC program through a behavioral science lens • Start with a small experiment: e.g., two communications • Adapt your IC plan, incentive, awards: build incentives using these behavioral science principles
- 22. ©2020 WorldatWork Behavioral science is the study of how people think and behave – wouldn’t that knowledge help you in your job? 21 Kurt Nelson, PhD President & Founder / Applied Behavioral Scientist The Lantern Group & Behavioral Grooves kurt@lanterngroup.com 612-396-6392
Editor's Notes
- Gustav Von Koeningswald In 1937, Gustav von Koeningswald was working on the island of Java in Southeast Asia Searching for new evidence of our early human ancestors To do this needed to find fossils Skull was the apex – able to distinguish between ape and human But skulls rarely are found intact Paleontologists need to piece together small fragments like a big, complex 3D puzzle Difficult to find all the pieces to make a complete skull So he enlisted the help of people from the local village – by giving them an incentive Paid them 10 cents per piece of skull Came through – he was delighted as they brought him many small fragments that eventually constituted a virtually complete skull Which was identified as a new ancestor Pithecanthropus (P. robustus). Homo Erectus However, unbeknownst to him, the local people had looked at his incentive and found a loophole They had taken relatively big pieces of skull and broken them into many smaller fragments – thus increasing their pay while creating additional difficulty and controversy for von Koeningswald He had a much more complex puzzle to assemble and the main expert in his field, Eugene Dubious accused him of incorrectly reconstructing the skull If Von Koeningswald had employed a behavioral scientist or day say, any of you, to design his incentive plan, he might not have had the negative behavior that was exhibited That is what this session is about – using behavioral science to understand our humanness and why we do what we do Particularly as it relates to motivation and behavior So that we can avoid the mistakes, like Von Koeningswald created, and also to tap into some of the human aspects that can maximize our efforts The next slide I’m going to show has two green lines – I want you to quickly determine which of those two lines is longer.
- Our brains typically see the top green line as longer – yet… they are the same Even when we know they are the same – it is hard to see it
- Here is different example – the lines across look wavy or curved for most people and yet… WE take the blue away and we see that they are not Again, even knowing it, it still seems like they are wavy
- Our brains fool us – and not just on visual illusions – on other things as well
- But behavioral science can help us understand the how and why
- This is no small issue. Employees who are disengaged are psychologically unattached to their work and cost employers almost 35% of their salary through lost productivity, lack of motivation, chronic tardiness, toxic emotional contamination, and a host of other negative behaviors.
- This is no small issue. Employees who are disengaged are psychologically unattached to their work and cost employers almost 35% of their salary through lost productivity, lack of motivation, chronic tardiness, toxic emotional contamination, and a host of other negative behaviors. Disengagement is caused by a lot of factors – but I believe that lack of engagement is underscored by two key factors… First, the fact that many organizations don’t see workers as emotional human beings. This isn’t to say that they think workers are human, but that they view them as Nobel Laureate Richard Thaler says, “Homo Economus” and not “Homo Sapiens” Second, even when we think of employees are real, emotional beings with feelings and issues and hopes and dreams, we don’t understand what makes them tick. Let’s explore at some of these human needs – that when unmet, lead to disengagement. What does behavioral science show us about some of those…
- If we don’t have a Sense of purpose – a reason for doing what we are doing Feel like we are making progress – and not stuck or moving backwards That we are masters of our own destiny and have control over our lives And that we are motivated by a lot of things beyond money and rewards Behavioral science helps us understand how and why and how we can impact Total Rewards (next slide)
- We are going to focus on two areas
- 4-Drive – developed by two Harvard professors in 2002 – which for a theory on motivation, is relatively new I’ve found that this model is powerful for business, because it takes a holistic approach and melds extrinsic and intrinsic motivation It’s also easy to remember – because it has a mnemonic of A, B, C, & D. Organizations tend to do a good job at the A drive – the drive to Acquire & Achieve We are driven to acquire things - money and rewards. It is insatiable but has decreasing returns – a $5000 bonus is highly motivational to someone making $35,000. It is less motivational to someone making $250,000 – but it still releases dopamine in our brains and drives our desire to acquire it Achieve is about achieving status – title, corner office, plaque – it plays to our pride and self identity As incentive and sales comp designers – you probably do a good job on this – however, there are three other drives – and we need to ensure that those are being satisfied as well – and not acted against B Drive – Bond & Belong – we are social creatures and will do a lot to maintain positive relationships with our …. Incentive and comp plans can build on this – including a team component or adding a kicker for collaboration efforts or company performance – but many plans can also detract from this and make it harder to satisfy – contests that only award the top few people inhibit bonding and sharing since my peers are my competition. C-Drive – Challenge & Comprehend. I call this my video game drive. We are motivated by challenges – having an achievable yet stretch goal. Think about it this way, if you were playing a video game…. Comprehend is about learning (gaining mastery) and the fact that we are inquisitive humans – we like new things and variation. Incentive plans that provide people with new challenges – that push people a bit are intrinsically motivating – “can I do this…” is what runs through peoples minds. Also are you providing variety and different challenges and rewards? We want a sense of novelty – are you using contests or changing up your rewards D-Drive – Define & Defend. This goes back to the sense of purpose. Define is defining how our purpose aligns with our organizations. When it does, we feel inspired and also that we want to defend it from outward threats… Incentive plans need to align with a larger vision – people need to understand how they are contributing to a purpose – for most, that is not just maximizing profits or income…it needs to be more. Show how the compensation plan is focused on delivering shared value….
- Teresa Amabile (Ah ma ball lee) has done a lot of great research on this and identified that “a sense of progress is the single… So how does this work Small wins matter – this is key, we need to feel like we are moving forward, having small accomplishments. Does your total reward system have short term milestones that can help drive this? Big wins inspire – these not only drive long-term motivation, but inspire others as well But – set backs or even maintaining the status quo demotivate us Are your incentive programs only focused on the top 20% - the remaining 80% will feel left out / stuck / demotivated – need to provide something, some ability to win for the majority of your employees
- Deci and Ryan have been doing work on this since the 1970s – their Self Determination Theory states that “we are motivated to be causal agents of our own life… Motivation is driven by three things – Competence (related to challenge drive) and Relatedness (related to Bond drive) – but adds in the idea that we want to be in control. Are you giving people a sense of control in your incentives? I’ve worked with companies on building this in through having employees select their own goals, maybe pick the type of payout curve they are working in – an aggressive one that is high risk but also high reward or a neutral one or a safe one with lower risk , but also not much up side. Can employees pick from a variety of awards or is there only one award offered?
- How a communication is framed impacts how it is understood and acted upon by employees. The way we structure a communication can make a big difference in attitude and behaviors One of my favorite studies…
- A study conducted by Gary Latham PhD, replaced 12 words in an e-mail from a company president to his employees to demonstrate the power of word choice. Half of the company received the president’s original e-mail and half of the company received the same e-mail with 12 achievement-focused words added in. The result? After a week, objectively measured performance showed an increase in effectiveness by 15% and efficiency by 35% for the employees who received the achievement centric email.
- For us human beings, emotions are contagious and the best way to communicate emotions is through stories We’ve been telling stories for a long time – maybe not back to Homo Erectus times, but for as long as we’ve been Homo Sapiens – it is wired into our DNA – we respond differently to stories Different synapsis in our brains fire – leading to longer term memories, greater emotional impact, and stronger behavior change. But how can you do this with incentives or sales comp you ask? We deal with numbers and rules…. Bring in a hero to the story Find some individuals who are doing best practices Bring their story to life….
- Our brain processes visuals 600 times faster than written words Vivid visualizations create stronger mental impressions in our brain – creating stronger memories and more emotional connection How does this ---- compare to this ----- Do you feel a difference?