Signals that sales managers send with rewards

Author: 
TIM HOULIHAN

Sales reps and rewards go hand in hand. Managers use rewards because they reliably deliver recognition and motivation. However, one often overlooked aspect of a reward is the signals that go with them.

This came to light in a recent conversation with Jana Gallus from UCLA’s Anderson School of Management at a Behavioral Science workshop in Philadelphia. Her work with Bruno Frey from the University of Zurich reveals new insights into the signals that managers and reps experience with rewards.

To be clear, rewards are not compensation. At their best, rewards complement meaningful compensation. And non-monetary awards, such as merchandise, experiences or travel, are most effective because they are genuinely separate from compensation. What’s more, non-monetary rewards amp up the emotions of the reps, not their ability to pay bills.

What rewards can signal

When sales managers use rewards, they send signals to their teams and organizations. Among the various messages they can send, rewards can signal the sales manager’s current priorities, or they can help build their team’s culture. A friend who manages a sales team at a manufacturing firm told me she uses discretionary rewards to signal and reinforce management’s objectives. Rewards help her say, “This is important to me.”

A sales manager from an ag distributor told me he’s using rewards to improve his company’s culture. He uses explicit do-this-get-that rewards to communicate transparency and fairness; and he uses discretionary rewards to inform his reps of the informal rules of his team, like how they should treat each other.

Gallus indicates that sales managers optimize results when they consider their reward signals carefully.

Rewards build bonds

Sales reps can use rewards as signals, too. Gallus notes that sales reps who receive rewards also collect an essential signal that “amplifies their beliefs and their ability to contribute.” Rewards are powerful at reinforcing key behaviors.

Receiving a reward such as President’s Club or Sales Rep of the Month builds confidence. To that point, Gallus said, “It tells them, ‘I’m doing the right thing,’ which has positive effects on effort and performance.” These types of established rewards allow the rep to signal, “I’m here,” which can be broadcast in social media to boost the company’s image, too.

Gallus’ work also reveals a little-known psychological fact that happens when sales managers reward their reps: bonding. Her work demonstrates that managers generate loyalty when they are (a) selective about the number of awards they give out and (b) consistent in their approach. Building loyalty can benefit the cohesiveness of the team and could reduce turnover costs.

Context matters

Gallus reinforces how context matters in giving and receiving rewards. Doling out rewards the right way “impacts motivation, social recognition and how peers judge [other reps’] work.” And of course, earning rewards without proper context can fall flat.

To that end, recipients of the awards must merit the honor. She notes that a “signaling failure arises when the award is given to undeserving employees.” Reps typically know who is worthy and who’s not, so sales managers must be careful not to misstep. Also, rewards that are not right-sized for the effort (too small or too big) indicate that the manager doesn’t know what they’re doing.

Rewards are excellent for reinforcing and motivating behaviors. They can signal the priorities that managers have and shape the culture of the sales team. Rewards can also help reps gain confidence and loyalty to their boss and company. However, using rewards carelessly can cause reps to cry foul and negatively impact the team.

Before you start issuing a new reward, consider the signals it will send. Let me know what signals you’re getting from your rewards.  

Tim Houlihan is chief behavioral strategist at Behavior Alchemy, LLC, blending applied behavioral science with experience and knowledge. He is also the co-founder of the podcast Behavioral Grooves.

Online Bonus: Delving deeper into insights from his conversation with Jana Gallus, Houlihan learned that effective incentives rely on a high degree of precision to generate motivation, while the opposite is true for rewards used as recognition. Read more about this in an online bonus at SalesAndMarketing.com/lift.