Strategies for Motivating Mary Kay Employees: Avoiding Negative Consequences When Implementing Changes to Employee Incentive Programs

Strategies for Motivating Mary Kay Employees: Avoiding Negative Consequences When Implementing Changes to Employee Incentive Programs

Gary W. Boettcher

Sullivan University

MGT 510

Executive Summary

This proposal addresses the problems associated with the alarming growth rate of car incentive winners as a percentage of the total number of Mary Kay beauty consultants. Between 1986 and 1988, the number of awarded cars doubled, as did the cost of the incentive programs. Also, an increasing proportion of beauty consultants were unable to maintain sales quotas, forcing premature reclamation of the cars. Mary Kay Inc. needs to reduce incentive program costs as a percent of sales by redesigning the program without demoralizing the workforce.

The proposal recommends changes within the structure of the car incentive programs and introduces new incentive concepts – both designed to reduce costs and increase sales revenue.

Introduction:

Our core tenants of the Mary Kay business strategy are 1) value and recognize the employee contribution and 2) compete in markets that are not saturated. Coincidentally, to the public, the Mary Kay "pink Cadillac" is the corporate image and represents the heart of the women who win them. It is the icon that draws women from their homes and into the workplace. The promise of a shiny new pink Cadillac and self-employment influences many women to abandon traditional careers for the Mary Kay promise – recognition in the form of a new pink car (Underwood, 2003).

Founder Mary Kay Ash held every employee in high regard and expected each manager to do the same. Her company's mission was to enrich women's lives. These Mary Kay Ash quotes are not fluffy rhetoric; rather, every successful employee in the Mary Kay organization imbibes them.

• "If your mind can conceive it, and if you can believe it, you can achieve it."

• "God didn't have time to make a nobody – only a somebody."

• "Act enthusiastic and you'll be enthusiastic."

• "Nothing great was ever accomplished without enthusiasm."

Historically, changes at Mary Kay Inc. have been met with significant employee resistance. Making changes in the automobile incentive program is problematic; employees feel like company executives are tampering with their hearts. The Cadillac is a badge of achievement expressing self-worth. Corporate executives admit that past program changes were made to reduce program costs, a move workers perceived as negative. Future reduction in incentive programs will likely negatively impact our corporate image and annual revenue growth, unless we craft changes with employee input.

Presently, Team Leaders, VIPs and Directors-in-Qualification, totaling 3,300 people, are responsible for motivating and training 175,000 front-line beauty consultants – a ratio of 1 to 53. Consequently, our strongest leaders and most successful sale directors do not provide enough sales and leadership training to the foundation of our sales force.

Corporate Concerns: Employee incentive program costs outpace sales force revenue growth

Profit margins based on double-digit revenue growth cannot be sustained at the current rate of program incentive cost increases. If left uncontrolled, costs will surpass revenue and destroy Mary Kay Inc.

The escalating cost of the Cadillac alone is rising at unaffordable rates; a rate we can no longer fund in our current incentive program structure. According to the Cadillac history Web site, General Motors recommended dealers sell a new 1984 Cadillac Seville for $22,468. In 1989, the recommended price had risen to $29,935 – a 33 percent increase. (http://100megsfree4.com/cadillac/) Table 1 displays the radical change in our car incentive program costs between 1977 and 1987.

Table 1

Growth rate of car incentive program costs

Year