Incentive Programs
Case Study
Incentive programs can be a very useful tool in your business, when implemented, monitored and managed properly. They can either help you get your staff to “buy-in” and get them to take those extra steps that you’ve been looking for. On the other hand, incentive programs may create a highly competitive, disloyal and money hungry team that are too focused on numbers and figures and not your clients and loyal customers. This is why it’s extremely important to design and implement an incentive program to help your business thrive and not dive.
You may be thinking, does my business need an incentive program? Instead of asking yourself this, see if any of the following conditions apply
Current performance does not meet expectations
The cause of inadequate performance relates to lack of motivation from staff
The desired level of performance can be quantitatively measured
The focused area of improvement does not conflict with other organisational goals, nor does it override everyday tasks and responsibilities
If you’ve ticked any one or all four of these boxes, don’t panic! This is a positive thing – you’ve noticed which areas are lacking in your business and you can now implement strategies to improve these areas.
Two years ago, we worked with a business who had been struggling with performance, motivation, and engagement from their team. Cashflow was tight and the Directors were tense. Our initial task was to find out where was the money? Why was it so hard to cover wages and other costs of running their business each week?
Part of our findings showed us they didn’t know their break-even point; they didn’t know how many clients they needed to see each week to cover their costs. Once we worked that out, we were able to set some targets and measures to get everyone back on board and bring the business back to life.
An incentive program was put in place where each staff member was given their quota of clients and any additional clients seen over their quota, meant a $X bonus. Initially the response was fantastic. Productivity increased by at least 50% and 90% of the staff reached their weekly target of clients and at least 40% of those had additional clients each week. AMAZING!
This performance was maintained for about 10 months until things started to change. The first thing we noticed was that the number of staff servicing over their weekly client quota dropped significantly. The next thing we noticed was the staff were no longer excited about their incentives or bonuses and the ‘buzz’ had disappeared.
What went wrong?
With each staff member hitting their targets every week for a long period, they started to automatically add their bonus as a part of their wage. The mindset had changed from earning their bonus to expecting their bonus. A successful program should have both a start and an end date.
There was no incentive for those who consistently reached their targets. Continuous and consistent results should be rewarded! It’s a marathon, not a sprint.
The bonus for each additional client changed over time depending on the staff member. It’s hard to aim for a moving target.
The program changed without notice and a cap of three additional clients was put into place, meaning that the potential rewards available to staff became a lot smaller.
Inconsistency- in some cases, the bonus was used to negotiate new terms of ordinary work compensation. The aim and reason for the incentive program became messy and got lost in the process.
Undefined rules and criteria for each client and staff member. The dollar amount for each additional client had too many different sets of criteria and it became too difficult to define whether or not the goal was achieved.
What did we do to fix this?
First of all, we made time to reflect and review the past ten months. We documented what went well and what needed to to be improved. Whilst we were doing this, we still let the current program continue to keep the team at ease as we didn’t want to cause stress and panic by abruptly stopping the program. After we built and tested a new incentive program, we rolled it out to the team.
This new program involved rewards for consistency of targets met, and random rewards for staff members who were going above and beyond their duties and targets. Most importantly, we set a start and end date of the incentive program 2.0 and also marked time in our calendars to review and reflect on this new initiative.
Having the knowledge of the company’s breakeven numbers and what each staff member needed to achieve each week to get there, turned the business around. Within 18 months the business went from making a significant loss to a healthy profit.
In summary, an incentive program for this company helped show both the business owner and staff what the team can achieve when the right motivations and mindsets are in play. Although money doesn’t need to be the main source of motivation for your staff, it can be a good tool to see what they are capable of, what capacity they can manage, and who is working to benefit your business, instead of just their own bank account.
Curious about implementing an incentive program into your own business? Stay tuned for our next blog, where we will outline seven key steps for a successful incentive program.