Mailbag Q & A: How to Effectively Use Competitions to Motivate Employees

Q: My company is currently experiencing a downturn in sales and my department is being pressured to return performance to more reasonable levels. The HR department suggested implementing a competitive employee incentive program to motivate the sales force, with the top three employees receiving a cash bonus.

This worked well for the first couple weeks, but now only a handful of employees are actively competing for the bonus. Is there some way to motivate more of my sales team to participate?

-- Frustrated Sales Manager in Boston, MA.

A: The problem with internal competition is that it's not really an ideal long-term method to improve employee performance. Research has shown time and again that building a culture of teamwork is a much better option for improving company performance (see The Enthusiastic Employee for examples).

Poorly designed internal competition schemes leave you open to unintended consequences, in this case potentially fostering feelings of inadequacy and resentment between top performers and the rest of your employees. The problem is that with only a few winners in a contest, you create a situation where only a few will benefit from increased performance -- sometimes at the expense of their coworkers (check out Robert Bacal's brilliant article at www.workhelp.org detailing this issue, with a hypothetical situation similar to the one we're facing).

However, this is not to say that intra-organizational competitions can never work. It just requires a bit more forethought to avoid those unintended consequences. While most good sales people are motivated by the prospect of getting an extra bonus check, not everyone is as motivated - this is where a tiered system works wonders. In such a system the first level of rewards is achievable by everyone with just a little bit more effort than usual. For example, the first reward could be won by achieving 50 billed sales (or whatever is slightly above the acceptable level of performance). A new bonus would be rewarded for achieving 100 sales and so on.

As an alternative to cash bonuses, you can also use promotional products to keep the rewards fresh and unique each month. Properly executed, this system is perpetual source of motivation since everyone has a chance to get something out of the experience (thus avoiding the sour grapes,"I'm not going to win anyway, so why bother?" mentality).