Can rewarding and recognising top performers have a negative effect on your business?

By Ko de Ruyter and Debbie Keeling

Every company needs them; re-seller top dogs. They drive success, they show others how it’s done, they collect the rewards, they stash the cash, they may come to expect the white glove treatment. At the same time, it is becoming clear that incentivizing these star business partners also has a dark side. And it is good for companies that run performance incentive programs for their channel partners to be aware of this. Many programs have a pyramid structure, in which high performers reap most rewards. This reflects the disproportionate contribution that some of your re-sellers make to your bottom line. You put them in the spotlight at recognition ceremonies and allow them to shine as role models (encouraging other business partners to ‘copy with pride’ or ‘learn how it’s done’). These are the people who get to go to Vegas, meet Elvis and fill their Instagram pages with tons of memorable experiences through enviable pictures. Makes sense and cents, right?

Well, yes and no. There is a catch. It is not unequivocally clear that our traditional loyalty and recognition systems always result in sustainable success. Au contraire! A phenomenon that has been labelled the "star effect" is likely to result in the demotivation of the rest of your business partners. It may even lead them to behave more opportunistically, perhaps act not with your best interests in mind and they may even decide to become brand agnostic and start representing your competitors. A recent study conducted in the US and Taiwan by Miao Evans and Li, involving over 200 sales professionals and their managers sought out to dig deeper and uncover factors that lead to both the positive and negative effects of rewarding top dogs on their less performing colleagues.

Let’s start with the heads up good news. You do not immediately need to redesign the structure of your program. Rewarding your re-seller top dogs does confirm their position as role models that the rest of your network will look up to and try to learn from or even emulate (regardless of the level of sales experience that they may have). It is shown that that having role models to look up to is especially important in relation to motivating sales people to learn customer relationship management skills. Ok, so what is the catch? The catch is that this positive effect of top dog recognition primarily surfaces against the backdrop of a sense of justice. So, where your re-seller network perceives the rules and regulations of your program to be fair, objective and attainable by all (i.e., not too fuzzy and subjective but based on hard results) it is a good idea to spotlight the top dogs. If this is not the case, then top dog recognition fosters an atmosphere of favouritism, and this is particularly likely to occur in smaller programs. So, there may be a double-edged sword buried within your incentive program.

What to do? Keep on rewarding sales excellence and recognize your business partners’ contribution to your success. Hard work, talent and performance should be stimulated. Encourage your other re-sellers to follow suit and facilitate exchange of ideas and best practices, perhaps incentivize your top dogs to share. At the same time, make the rules and procedures of your program transparent, position rewards as attainable to all members and deploy ‘hard’ milestones. Avoid cronyism. Involve your business partners in program design decisions, collect their feedback and suggestions for improvement, do not be afraid to discuss decisions that you make openly. Your top sellers need to be recognized, and making it clear why they are rewarded emphasises attainability, but taking into account these measures will help in guarding the potential backlash of doing just that.