SalesForceXP: September/October 2008 Coverstory: A Warehouse Of Motivatiom - How Harrah’s Boosts Group Sales with Non-Cash Incentives

COVERSTORY

SalesForceXP September/October 2008 Cover

A Warehouse Of Motivation

How Harrah’s Boosts Group Sales with Non-Cash Incentives

by Paul Nolan

No one in the executive ranks at Harrah's Las Vegas would have argued with Jordan Clark if he had declared non-cash sales incentives ineffective back in the fall of 2006.

Clark's division, officially known as Las Vegas Meetings by Harrah's, had just completed a three-month campaign aimed at getting the sales team to convince corporate clients to spend more on food and entertainment. Everyone involved was underwhelmed with the results-the customers, the salespeople who participated in the incentive program and, most important, Clark himself.

"It was a nerve-wracking three months," says Clark, vice president of sales for the meetings group. "It clearly wasn't taking hold with the salespeople. We got some incremental sales out of it, but not nearly the returns that we were hoping for, and we started questioning if we made the wrong decision by going this route."

Plug and Play

BI's reward structure proves versatile and universally appealing

Jordan Clark was relieved that a few tweaks to his non-cash sales incentive program were all it took to go from the outhouse to the penthouse in terms of performance. He has since discovered that it's a system that, when adjusted carefully, can accomplish different goals or even work with other personnel.

Earlier this year, Las Vegas Meetings by Harrah's broadened the program to include frontline service people in catering. The campaign is designed to engage those employees in adhering to - and exceeding - the top-notch service standard that Harrah's wants to deliver, and rewards them when they do.

Clark also is able to turn up the volume on the sales incentive campaign simply by adding more "hot dates" that pay off in AwardperQs(tm) points.

"It's all about being able to apply an appropriate incentive to get the desired outcome that you're looking to achieve. In theory, it sounds very simple; in reality, putting a program together that actually tackles what you want is more difficult," he says.

In fact, the BI incentive program that Clark enlisted in 2006 replaced a do-it-yourself effort that he spearheaded the previous year. "I ran an annual President's Club and it was the most horribly run incentive program on the face of the Earth," he says unabashedly.

He thought he was being a hero offering trips to Rome, Brazil and Paris to top salespeople, but several salespeople asked him, "Who's going to watch my kids?"

Clark also says he couldn't give the incentive campaign the attention it deserved. "I would talk about it at the beginning of the month and then I'd forget about it until the end of the month because I have other things I'm responsible for." The BI programs run on autopilot - or so it seems, because BI provides the care and feeding that keep participants engaged and produce record-breaking results.

Cut Me Off A Slice of That

Rather than abandon the concept altogether, however, Clark and his sales representative at BI, the Minneapolis-based business improvement company that created the incentive program, began to analyze what went wrong. Similar incentive campaigns were producing astounding returns for other BI clients. Clark was still a believer.

Group business through 2006 had been solid if not stellar at the seven Harrah's properties in Las Vegas, but Clark wanted to increase bookings significantly in 2007 and decided to use non-cash incentives as a means to this end.

Soon after the first program plodded to a halt, Harrah's launched a new campaign designed to steer corporate customers to less-attractive dates. Who wants to hold a meeting in Las Vegas over Mother's Day weekend? As it turns out, plenty of companies will if they're pointed that direction by a salesperson and offered a good enough deal on a block of rooms.

"It went over like wildfire," Clark says of the new incentive program, which rewarded points to salespeople who booked groups into a list of harder-to-fill dates. The points could be redeemed for a variety of rewards - everything from vacation packages and tickets to sold-out concerts, to big-screen TVs, exercise equipment and elaborate outdoor grills. One rep even saved enough to get a seven-person spa for his backyard.

Occupancy during traditionally slower periods (including the summer of 2007) was significantly higher than during the same periods one year before. In fact, Clark says, the incentive program returned a whopping $228 to $1 through the end of 2007! For every dollar invested in rewards, Harrah's realized $228 on its bottom line.

Jordan Clark of Las Vegas Meetings by Harrah’s loads up for another sales push. By using noncash
incentives, Harrah’s has realized a return of $241 for every dollar spent on rewards in the past two years.

Lesson Learned

"The concept of the second program was much easier to understand, yet the returns were phenomenal," Clark explains. "The first one we put together was too complex and wasn't easily grasped by everyone." What's more, some salespeople reported back that it was difficult to impact the areas of client spending that the first program was aiming to impact.

"In 2007, we sent the salespeople on a mission and they filled occupancies like we've never filled them before," says a relieved Clark.

As simple as that second program was, it was simpler still to decide to stick with it in 2008. The results have been even more impressive: Between January and June of this year, the incentive program has returned $341 for every dollar invested. (That's an aggregate of $241 to $1 for 2007 and this year combined.)

Is Clark nervous about running a good thing into the ground? Will his 55 sales reps eventually get bored with the non-cash rewards? Not likely, he says assuredly. "They're always so proud that they have accomplished a goal and they get things for themselves through this program that they would not buy with cash. I have a single mother on my staff who got herself a designer purse. She told me that she would never spend $300 on a purse, but now she has one and she feels good about it."

Jordan Clark of Las Vegas Meetings by Harrah's loads up for another sales push. By using non-cash incentives, Harrah's has realized a return of $241 for every dollar spent on rewards in the past two years.

Why It Works

Longtime users of non-cash incentives already know one big secret behind their effectiveness: People will push themselves much harder for a tangible reward than they will for the equivalent value in cash - and they'll feel good doing it.

"Non-monetary rewards help reinforce the social contract - the relationship -that we have with our employers," explains Tim Houlihan, vice president of reward systems at BI. "What we'll do for money is very different than what we'll do for good will. In incentive and recognition situations, the social contract is what gets people over the edge, it's the part that's linked to the emotional side of what we do and why we do things."

Houlihan cites behavioral economist Dan Ariely's explanation of the difference between a social and a financial contract, which Ariely presents in his book Predictably Irrational: The Hidden Forces That Shape Our Decisions.

Imagine going to Grandma's house for Thanksgiving dinner and when you get up to leave, you pull three $20 bills out of your pocket and say, "This should cover me for dinner, Grandma." It changes the social contract into a financial one - and it's a bad execution of it.

"In the work world, we get asked to go above and beyond corporate initiatives. Oftentimes, recognition is used to reinforce particular behaviors," Houlihan says. "In these cases, employers must stay in the realm of the social contract in order to not throw the relationship with their employees out of whack. When someone does really great work, acknowledge them publicly, offer words of encouragement and recognize their achievement with a non-monetary reward."

If a boss says, "You did a great job. Here's an extra $50," that sort of recognition changes the reward from a reinforcement of the social contract to a badly performed execution of the financial contract. Our compensation - both fixed and variable - should be the extent of our financial contract with our employer. All the above-and-beyond work we do should be recognized under the social contract for it to be most effective.