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July 01, 2017

Working Smart

Why Recognition Is Your Business

by Jay Leisner

Click here to order the July 2017 issue in which this article appeared or click here to download it to your mobile device.

Attracting and retaining independent consultants is a primary goal for any company owner or executive in this channel. And since direct selling consultants are not employees but independent contractors who are operating their own businesses, it sometimes takes multiple ways to encourage them to “stay in the game.”

Money paid through a multilevel compensation plan will help keep consultants active, but by itself it is simply not enough to keep them engaged. Consultants are volunteers, so it helps to get to know them and to recognize their efforts. Remember that a little goes a long way.

Connecting with consultants through encouragement accomplishes several objectives at once. It recognizes their achievements with something beyond money, and it rewards behaviors that we wish to become repetitive. It also can increase activity, decrease attrition, and help build a culture of personal development.

If consultants feel like they are part of something greater than themselves, they can become more committed to your company and stay in the business longer.

Field compensation is most likely already your largest expense. In fact, the average direct selling company spends 30-50 percent of its sales on compensation plan rewards. We have also found that direct selling companies spend only 3 to 8 percent of sales on recognition, which typically includes awards, contests, incentives, and national and regional conferences. Take this opportunity to get the most out of your recognition budget, and endeavor to spend all you’ve budgeted with the goal to maximize the impact of your spending. You’ll be glad you did.

The Experience of Recognition

For every 100 people who enroll to participate in your income opportunity, how many do you wish to experience company recognition? The types of recognition you should offer your new consultants depends on your number.

If you’re not sure, I recommend your goal be at least 50 percent of your consultants receive recognition. And what exactly do you recognize? The short answer is that anything the achiever believes is worthy of acknowledgement can generate excitement and further engage that consultant. 

We often recommend up to 50 measurements for recognition to direct selling companies.
Here are the top 15. Recognize new consultants when they:

  1. Attain a specific career personal sales target
  2. Achieve the first Fast Start goal
  3. Achieve the second Fast Start goal
  4. Achieve the third Fast Start goal
  5. Achieve the fourth Fast Start goal
  6. Beat their previous personal best in monthly personal sales
  7. Beat their previous personal best in monthly group sales
  8. Have an anniversary
  9. Have a birthday
  10. Recruit their first consultant
  11. Recruit their second consultant
  12. Recruit their third consultant
  13. Promote to new title or rank in the compensation plan
  14. Promote to a specific new title or rank faster than anyone else previously
  15. Recruit a specific number of consultants over their career

Contests versus Incentives

There are important differences between contests and incentives. Contests encourage competition and discourage collaboration, because only a select few will win. With a contest, you don’t know that if you do X, you will get Y.

For this reason, they can be problematic. You don’t know what you have to do to win because there are no specific goals.  Also, there is no way to measure how close you are to winning, and you cannot be certain if you won until the contest is over. Further, your performance could be excellent, but because contests are competitions, you could still “lose,” which actually can create negative feelings for top performers.

On the other hand, contests do have their good points. The company goes into a contest knowing how many winners there will be and therefore the total cost in advance.

The company knows how many hotel rooms to book and how many employees need to attend based on the known number of winners, so it can plan now for their absence from daily work.

However, whenever a direct selling company runs a contest, there will be a group of top performers who did not make the cut. And since they are volunteers and not employees, failing to reward their performances may not be the best option. 

Incentives, on the other hand, are programs where all of the performers who achieve specific targets can win. With an incentive, you know if you do X, you will get Y.

I think many companies with multilevel compensation plans would benefit from plans that are designed to motivate and reward specific behaviors. We have found rewarding the following 12 behaviors can motivate consultants to produce even better results in the future: 

  1. Personally purchasing the products or services
  2. Selling to customers (nonparticipants of the income opportunity)
  3. Introducing the income opportunity to others (sponsoring/recruiting)
  4. Building a team
  5. Training, supporting and nurturing others
  6. Becoming a leader
  7. Personally developing leaders
  8. Helping other leaders to develop leaders
  9. Meeting or exceeding minimum activity requirements
  10. Being promoted to a higher title or rank
  11. Meeting or exceeding title maintenance requirements
  12. Staying active and engaged in the business (retention)

For best results, each contest or incentive should be designed with consideration of several, but not all, of these behaviors. While great compensation plans are generally complex, recognition programs need to be less complicated. 

How to Design a Contest or Incentive

It helps to think strategically, so you know the cost of your program, and are able to predict the likely number of participants. Begin by reviewing the 12 salesforce behaviors. Then, select no more than four specific behaviors to be encouraged.

Determine the achievements to be rewarded, and identify how you will reward each one of them. Consider weighting if multiple achievements are to be measured.

Evaluate past periods to see how many winners there would have been, who would have won, and what would the cost of the rewards have been. If there are too few winners, reduce requirements to generate a new data set based on history. If there are too many winners, increase requirements to generate a new data set based on history.

Review the new data sets and adjust requirements until you have a data set with the desired number of winners and costs for rewards. Adjust requirements up a bit, assuming that achievers will do more to get the new rewards.

Consider including two sets of requirements, one for new consultants (who are in the business less than one year when the contest or incentive begins) and another for those who’ve been in the business longer.

Design your programs in groups, not just one as one island program, so that the activities encouraged by one program can help feed the next one.

Prepare IT data collection and redemption tracking requirements. Determine the exact data to be shared with the company and the consultants.

Monitor the results and compare them to other periods of time using your Key Operating Indicators.

Don’t be afraid to introduce new elements if the old ones aren’t working, or if you believe something different will be better.

Is Recognition a Crutch?

For many years, I have observed that companies with compensation plan deficiencies can often depend heavily on contests or incentives for recruiting. As a result, in months where there is no recruiting incentive or recruiting contest, recruiting can be significantly diminished or completely absent.

If this is the case, before you ramp up your recognition program or contests, consider whether or not your compensation plan alone is adequately rewarding the recruiting behavior.

Once you establish that, you can move on to evaluating, and possibly cleaning up, your recognition program. If you’ve made a mistake in the program, don’t worry; everything is fixable.

Maybe your company has an incomplete recognition strategy or does not set participation goals for each recognition program. Or, it does not spend enough money on recognition, has too few zero- or low-cost rewards, does not publish achievements, offers too many contests or too few incentives. That’s OK, too. Even if a program uses lucky draw rewards, does not offer leadership meetings or leadership trips as rewards and fails to report progress toward rewards to participants, you have the power to correct all of those mistakes.

Why Recognition Is So Important

While your expenditures on recognition are probably small compared to what you pay through your compensation plan, always remember that recognition is equally important to attract and retain your independent consultants.

All recognition programs should be designed to fit your business model and compensation plan, so don’t “set it and forget it.” Just as compensation plans need to be refreshed from time to time, so do your recognition programs.

Jay LeisnerJay Leisner is President of Sylvina Consulting with 30 years of compensation plan and direct selling expertise, having worked with companies across the globe.