Rewards vs. Incentives: Know this simple distinction for better compensation management in 2018

compensation management

Incentives and rewards—they’re two words we learned so long ago, and we often use them interchangeably. In most cases, that’s fine. But, in the world of sales compensation management or customer service, using those words interchangeably can be counterproductive.

If it’s your job to motivate sales or service reps, listen up. The distinction of these words can help your compensation management in 2018 (and make you better at your job!).

Let’s look at these words’ definitions:

Incentive: something that incites or has a tendency to incite determination or action.

Reward: something (as money) given or offered in return for a service or accomplishment.

Just by breaking them down to their definitions, you can see that they’re inherently different. Incentives incite action to reach a desired outcome, while rewards come after that outcome, if it’s ever reached.

Essentially, if you’re only using rewards in your compensation management to drive behavior and using the words interchangeably, you’re only painting part of the picture.

As SellingBrew described after interviewing Giles House, rewards don’t affect decisions in the moment, so they’re less likely to change behaviors. Incentives drive sales or service reps at every step to the end goal (a sale or customer service case successfully closed, for example).

Right out of college, I sold chocolate for a small startup in San Francisco. I was rewarded with a very standard commissions plan—the more I sold, the more money I made. What did that mean on a day-to-day basis?

I performed the same tasks. I called the same amount of people each day, delivered the same amount of samples, and always gave one demo a week. And I was always rewarded the same amount: enough. It worked but there wasn’t growth.

The good thing about incentives is that, unlike most rewards, they don’t have to cost money—and somehow usually make more of it. My old boss could have incentivized me with an already-existing trait: competitiveness. I worked with two other (quite competitive) sales reps. We were all right out of college without sales experience, and we wanted to prove ourselves.

But we had no visibility into each others’ performance. If I could have seen that Matt was making more calls than me, I would have been incentivized to call more people. I would have likely sold more as a result, without the reward (or money) in mind at all.

So, what can you do with this information in your 2018 compensation management? Question yourself—are you using a mix of incentives and rewards? Use the correct language and show others that there is a difference. Then create better compensation plans.

By Hannah Pap Rocki | December 15th, 2017 | Commissions

About the Author: Hannah Pap Rocki

Hannah Pap Rocki

Hannah Pap Rocki is Marketing Coordinator at CallidusCloud. With a background in psychology and photojournalism, she has an interest in connecting with people to tell accurate and compelling stories. Some of her other interests include drawing, camping, and practicing yoga.