Employee Incentives or Rewards - What Serves Customers Best?

It is generally held that attractive incentives, with clear goals and metrics, motivate employees to perform their best towards achieving those goals. A most telling example is the cash commission offered to salespeople for achieving certain sales targets. And, arguably, an extreme case of that is commissioned salespeople in car dealerships. How was your last car buying experience at a dealership? How much trust did you place in your salesperson? Were you wondering whose side they were on? Even if it is simply a perception, the term "car salesperson" brings to mind less than favorable adjectives. Does it have to be that way?

Imagine walking into a dealership where the salespeople were not on commission.

Where the salespeople are more interested in your family and their vehicle needs than in filling the quota for the month. A dealership that has sold cars to your family and friends for years and nobody at the dealership earned a direct commission on any one of those sales. Well, welcome to Terry Ortynsky's Royal Ford in Yorkton, Saskatchewan.

Terry believes that commissioned salespeople find themselves in a conflict of interest with their duty to serve their customers.

To keep everybody focused on their task and their incentives, dealerships often divide up their functions into sales/credit/lease or service/parts/body shop and have different departments run those functions, with individual incentives. If your motto is to "Make it easy (for the customer)," as Terry's is, the more you divide up your dealership functions, the more difficult it makes it for the customer. Yet, highly incentivized sales puts such emphasis on closing the deal and discharging their function, that the salesperson is neither operating in the interest of the dealership nor in the interest of the customer. Terry wonders if the customer is better served by not having commissioned salespeople, but rather competitively salaried employees receiving reasonable rewards when the company does well. At his dealership, he neither has such compartmentalized functional departments nor commissioned salespeople.

Incentives are payments of cash or kind made by an employer to the employee, upon achievement of certain goals and metrics, as per the terms of an implicit or explicit contract. In contrast, rewards are payments of cash or kind made by an employer to an employee in appreciation of the achievement of certain goals and metrics totally at the discretion of the employer. In other words, incentives are intended to motivate the employee, rewards are a way of saying thank you to the employee.

What better serves the customer? Incentives or rewards?

When designing incentives for your employees, make sure that they are not in conflict with the interest of the customer. If they appear to be in conflict, you and the customer might be better served with offering your employees a reward. Make your intention of rewarding them explicit, but do not enter into a contract on how and when the reward will occur.

As an epilogue to the story, we should point out that Terry Ortynsky's Royal Ford has served the Yorkton community for 25 years. They do not view customers to be individuals; their customers are families.

They have built a lifestyle-based culture within their company, where the lifestyle promoted is that of the dealership family. Imagine you were an employee of this company. What is your response going to be when your next door neighbor asks you about your work at your backyard barbecue? Are you not going to be proud of the dealership family? Are you not going to cite your non-commissioned salespeople as evidence of serving your customers? Terry Ortynsky's Royal Ford has an intentional culture.

Food for Thought is our way of sharing interesting concepts on corporate leadership and management with others who might find it useful. The thoughts offered are intended to be controversial and thought provoking. They are intended to help our readers intentionally realize their potential, what we call Potentionality.