Mary Kay Cosmetics: Sales Force Incentives

Mary Kay Cosmetics: Sales Force Incentives

Case Analysis

Mary Kay Cosmetics is a company known for providing women with exceptional opportunities for professional achievement and economic success and rewarding women for their success. Mary Kay Cosmetics uses several programs to motivate, recognize, and develop its beauty consultants, which include recognition in a monthly magazine, annual events, gifts and prizes and most importantly, financial incentives. At the heart of the financial incentives Mary Kay provides is the three car programs offered to beauty consultants at different stages of their career. The car programs have proven to be effective motivators; however the costs to the company have skyrocketed as the number of car winners as a percentage of beauty consultants has doubled, despite increases in program qualification requirements. The VIP car program is the main cause of concern for May Kay because of the large number of leased VIP cars, high interest rates and insurance premiums, and large losses on cars in service for short periods of time. Mary Kay's top management is now faced with finding a solution to rising program costs of their powerful incentive plan while maintaining sales force moral and motivation. The key issues that must be considered in finding a solution to the high costs of Mary Kay's Marketing Plan are how beauty consultants will respond to changes in the incentive plan and how implementing the necessary changes will affect the sales force.

One of the problems Mary Kay's top management found with raising program qualification requirements as a solution to reducing program costs is that in created a "rush" by beauty consultants to attain VIP status before the effective date of the program change. This resulted in the number of leased VIP cars to increase temporarily instead of slowly decreasing. Perhaps management should have considered the actual reasons beauty consultants were motivated to attain VIP status. According to the case study, Mary Kay aggressively advertises their Marketing Plan by enticing new recruits with promises of unlimited earning potential. Assume then, that beauty consultants, in trying to recruit new consultants are failing to convey to the new recruits the importance of founder Mary Kay Ash's original mission. This mission included not only economic success and professional achievement, but also personal development and independence for women. Beauty consultants who join the organization primarily because of the promise of material or social rewards are exhibiting extrinsically motivated work behavior. According to George and Jones (2005), employees who are extrinsically motivated perform the behaviors not for its own sake but rather for its consequences. In other words, these beauty consultants are reaching sales goals, not necessarily because they enjoy their work or value a sense of accomplishment, but rather because of the rewards they may be entitled to receive.

Mary Kay's management must also consider the reasons their beauty consultants are motivated to reach certain levels of achievement in the organization. George and Jones (2005) explain that need theories may describe what motivates employees to behave certain ways and focuses on their needs as sources of motivation. It is also important for management to realize that members of their organization possess different goals and motives. Studies reviewed by Lawler (1994) indicate that there are significant differences in the importance people assign to extrinsic rewards and organizations have little control over the how much members will value the various extrinsic rewards. According to Exhibit 2 in the Mary Kay case, a typical beauty consultant is 24 to 54 years old, married with children and holds another job, which means they do not rely on selling Mary Kay as their only source of income and may not value some or all of the material rewards that come with attaining directorship status, simply because they do not need them. Top management needs to also consider the goals of individual beauty consultants as well as organizational goals. Organizational objectives contribute to creating a motivating work setting because they provide employees with a sense of meaning and purpose and help employees understand the goals they should be striving for (George and Jones, 2005). Mary Kay Cosmetics wants to be the top sellers in their industry, but they also want to promote a customer-centered culture that strives for total customer satisfaction (Incentive, 1991), but their current incentive program doesn't provide rewards for beauty consultants with high levels of customer satisfaction. Just because a VIP is a great seller and has the ability to recruit, doesn't automatically mean that she has the most satisfied customers of all her team members. Reward systems, such as Mary Kay's motivate employees to do well in the areas of their jobs that are measured by the performance-evaluation system. The problem is that rewards systems do not always measure all the behaviors that the individual need perform for the organization to ultimately be successful (Lawler, 1994).

The management is concerned that they are not getting as much as they could from all VIP consultants above the level of sales and recruiting needed to maintain use of their cars and that the VIP car program in general is costing them more than its worth. According to the Schedule of Nonfinancial Incentives for Mary Kay Consultants, there are currently four titles or positions before acquiring VIP status, but no titles in between attaining VIP status and eventually reaching directorship status. Individuals at the VIP level can be motivated to reach sales and recruiting goals above required levels, even if they do not desire directorship status, by implementing a continuous bonus system as recommended by Michael Jensen of The Harvard Business School and described by Locke (2004). In this type of bonus system, VIPs would be rewarded for the level of sales and recruiting they attain above the requirements with financial incentives. For instance, aside from the 4% to 12% commission on personal recruit's production, VIPs would also earn a 3% bonus for every 2% increase in sales above the minimum requirements. In order to enhance the beauty consultants' career path at this stage, management should also introduce some additional titles in between VIP and director with a focus on those VIPs who are exceptional recruiters but not necessarily great sellers. A title such as "VIP Star Recruiter" would recognize those who have recruited a strong sales force above the 12 recruits and 10 actives required for VIP status. These individuals would receive non-financial incentives, such as a special pin