I was at a dinner at a working cattle ranch outside of Denver not long ago, but this ranch had a difference. Rather than raising cattle for the table, the business raised breeding stock and sent animals and other products, like embryos, all over the world. Every animal on the ranch had its genetic makeup tracked in a database and a unique ear tag that told something about it. I thought it was cool the way they applied science to the ancient practice of animal husbandry. But not everything was about genetics — some of it was more psychology.
As entertainment a real cowboy (Hey, I’m from Boston, Ok?) was tending to a young bull outside the restaurant and I went over to check things out. The bull was not full-grown, weighing in at only about 2,300 pounds and the cowboy gave me a lot of information.
Then the bull got a little restless, but honestly, it was something I couldn’t pick up on but the cowboy, with his experience, easily could. He picked up what looked like a long prod and I couldn’t figure out what he was going to do with it but what he eventually did completely surprised me. He began gently stroking the bull’s belly, that’s all. When I asked what he was doing, in typical cowboy fashion he said something that I’ve never forgotten, though at the time I didn’t see it as an answer to what I thought had been a direct question.
“Everybody likes to get their belly scratched,” he said, and that was that. As confirmation the bull seemed to relax.
Of course everybody likes to get his or her belly scratched both physically and metaphorically. Whether it’s in business or your personal life, a little communication that says, I understand you and you’re Ok, is an important elixir.
Hold that thought for a moment, please.
About six months ago I was speaking with a community manager, someone who helps businesses develop and run communities that reach out to improve bilateral understanding between vendors and customers. This woman happens to be a former elementary school teacher and we were talking about the power of using gamification and badges in a community setting.
I was doing research for a book and frankly, I was skeptical of the value of badges as rewards for community participation — after all, we were talking about adults, right?
“You’d be surprised,” the former teacher told me. “Everybody likes being recognized, kids, adults, it’s all the same.”
All this has me thinking about incentive compensation plans. They’re all a kind of belly scratching and it makes me wonder why in business we treat incentives so casually. Why, for instance, don’t we put everyone on an incentive plan of some kind? Why just sales people? And why, if we know incentives are so powerful, don’t we do a better job of targeting the behaviors we want to cultivate?
First things first. Many businesses provide some form of retrospective attaboys for a job well done. But reward after the fact without some form or objective reduces the reward to a random act of kindness. I am not against kindness but this is business and the goal should be repeatability not randomness and if rewards are randomized the idea of incentivizing good behavior flies out the window.
But incentives are not enough. Every day we see examples of sales people with incentives and overly broad goals gaming their compensation plans as Chris Cabrera points out in his new book, Game the Plan. Incentives have to come with crisp and concrete objectives otherwise if there is a path of lesser resistance to the goal, some people will undoubtedly take it — and they should because it’s in their self-interest. But this results in the incentives being paid without the objectives being attained and that’s not good.
For example, a sales goal only focused on a revenue target in any company with more than one product makes for a compensation plan that’s begging to be gamed. We all know that revenue mix is important otherwise one part of the business can get too busy while another does little. Worse yet, some products are more profitable than others and tracking only gross revenue loses that. But creating objectives and incentives detailed enough to cover all this is a tall order.
For all of human history the path of least resistance has been the standard operating procedure, but something amazing happened when database systems became available in the Cloud and companies like Xactly began tailoring them to the incentive compensation question.
With a system to monitor and report on all of the myriad happenings in the revenue generation process it’s now a trivial matter to develop objectives and incentives for sales teams and even the whole enterprise. Individualized objectives and rewards can be programmed and detailed scoring can provide unambiguous answers to some of the thorniest issues in motivating and managing a team.
Not long ago incentive compensation systems were thought to be a boon to the CFO enabling a business to reconcile all of the accounting for commissions at the end of a quarter. They certainly do that but if you think that’s their sole mission, you might want to revisit how important it is to proactively incentivize the behaviors that maximize profits and not simply to do the accounting. In today’s decentralized businesses where individuals are supposed to take on responsibility for doing the right thing without being told, clear objectives and the certainty of a belly scratch have become key components of organizational success. Just ask a cowboy or a teacher that you know.
Ok, you know all those studies that you like? The ones that tell you that this percent of customers act a certain way and all that? Well, the way we get those numbers is by talking people like you into answering a few questions. It’s time to answer a few questions if you don’t mind or I’ll have nothing to write about someday (ha!). But seriously, you’ll be aiding humankind in many mysterious ways if you can take just a few moments to participate in these research studies — but only if you think you fit the need.
Marketing Performance Management
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The headline from yesterday really caught my eye: “Gartner Says by 2014, 80 Percent of Current Gamified Applications Will Fail to Meet Business Objectives Primarily Due to Poor Design”. It immediately brought me back to that old chestnut from CRM’s salad days half of CRM implementations would fail.
It’s not that the prediction is wrong or that it’s not backed up by research, it’s that the notion in the headline leaves me saying, “And?” The and is the interesting part and the press release on which the report is based goes into some detail that suggests that the authors are on track and that there’s time to do something about this canary in a coal mine. This para from the PR summarizes the problem,
“The focus is on the obvious game mechanics, such as points, badges and leader boards, rather than the more subtle and more important game design elements, such as balancing competition and collaboration, or defining a meaningful game economy,” Mr. Burke said. “As a result, in many cases, organizations are simply counting points, slapping meaningless badges on activities and creating gamified applications that are simply not engaging for the target audience. Some organizations are already beginning to cast off poorly designed gamified applications.”
Yup, that’s about right and I would say it’s also tres, tres typical for an emerging market. First you get the mechanics right then you work on the substance. I think that by 2014 the twenty percent who survive will have moved on to substance.
You know, that paragraph describes nothing as well as it does the airline industry and its obsession with frequent flier miles. Sadly, those programs have been around a long time and have failed to deliver much real value so that makes me skeptical of the 2014 assertion.
Your whole status in the airline programs is wrapped up in a badge that gives you absolutely meaningless rewards like getting on the plane earlier. But as soon as you spend the miles you’ve built up you lose your status. You are no longer as valuable despite your demonstrated loyalty. It should not be that way.
Airlines are a great example of failure at “defining a meaningful game economy.” If I was an economist looking at frequent flier programs I would conclude that all of the programs are in a recession driven by hoarding. I know too many people who are wrapped up in the idea of making it to the next level of a program as if they were playing PacMan or something.
Few people spend their rewards because it involves losing status. But I bet the airlines like it that way. As long as the points stay on the books, they are an unclaimed liability and some airlines have taken to “rewarding” dormant or semi-dormant accounts with magazine subscriptions to clear those liabilities.
You can’t have it both ways. If your game economy involves a reward beyond the meaningless badges everyone throws around, them there has to be a redemption mechanism that won’t diminish status. One’s status should not be held hostage to redemption. A loyal customer or one with demonstrated expertise is intrinsically valuable and such customers should be exalted and, of course, this goes way beyond frequent flier programs.
I just got a check from Costco rebating me two percent on all of my purchases for the last year. Two points doesn’t sound like a lot but it paid for a heck of a Thanksgiving. I am loyal to Costco but mostly because I get good service and good prices every week.
A few years ago, I gave up on frequent flier points. I used up all of my points flying first class until there were only enough left to get some magazines. Then I switched airlines for better service. Now I have to pay to check my bag and I get on the plane with the rest of the plain old citizens and I don’t mind. I actually found it insulting as an American to have to walk on this carpet but not that one as my miles status fluctuated.
My point is that a sub-par service will only be helped so much by gamification and the rewards have to be meaningful, which is what Gartner is saying. For all the people with a gazillion miles flying religiously on an airline that treats them like dirt, there are some intrepid souls who still shop for deals and quality. So the danger with gamification isn’t that the approach will die off, it’s that vendors might hide behind their games thinking they are doing better than they are, and that’s the beginning of serious business problems.