Should you pay employees for better customer service?

When talking with business owners and managers, the topic of cash incentives arises every now and then.  Some managers feel they’re the best way to get employees to deliver better customer service. Others disagree. But the question remains.

A recent article in Entrepreneur.com suggests money is not always the best way to motivate employees to better performance.

“…research shows it only works in the short term and other things keep employees happy and productive over the long run.”

In the article, Bob Nelson (author of “Keeping Up in a Down Economy“) says “…flexibility and time and more important rewards.” He offers other ideas such as long lunches, customized work schedules and praise as ways to reward employees.

In their recent annual Rewards Management survey, CIPD found more emphasis on non-cash incentives:

“The survey also found that recognition and non-cash incentive schemes had risen sharply in popularity. Just over 40 per cent of employers have recognition programmes such as “employee of the month” schemes – up from 31 per cent last year – while the proportion using non-cash incentives jumped from 17 per cent in 2009 to 30 per cent this year.”

(From PeopleManagement.co.uk)

Note: This could be due to a recognition that non-cash incentive work better. Or it could be because employers have less cash available.

While I believe performance needs to be recognized I’m not a fan of cash incentives for providing a certain level of customer service. I see a couple problems with this.

First, employees who are motivated by money will focus on that as the reason for providing good service. So their performance might be phony. And it will only last as long as the incentive is there.

Second, you have the risk of people trying to ‘game the system’. They focus more on the money than on serving customer well. To some employees it becomes a contest to win rather than part of their jobs.

Third, it leaves out other motivations. Remember, people are motivated by more than just money. The most basic human desires are to belong, to be valued or appreciated and to help others. Cash incentives ignore these other needs.

When people provide excellent service because they want to it will be better service and it will last. Plus they are better role models for new employees.  They help build and carry the culture of the company. People who smile for money will never do that.

What’s your opinion? Do you think employees should get extra pay for providing amazing customer service?

The article was written by Kevin Stirtz