Incentives

For many companies, incentives are a simple proposition: Do this and you'll get that. This approach usually works, but your company will get more mileage out of its incentive programs if it recognizes all the factors that affect performance: motivation, skills, understanding of the goals, recognition, and ability to measure progress.

To make your program as productive and measurable as possible, we recommend that you create an Incentive Planning Worksheet outlining all the steps of your plan. We have provided recommended worksheets for many of the following sections. Adapting them for your program will help ensure you that you have covered all the key steps.

STEP 1: UNDERSTAND THE ROLE OF INCENTIVES IN BUSINESS

Incentives are used to get people to focus both on your goals and what they can do to achieve them. Offer your employees, sales team, or distributors a valuable enough incentive and they'll do anything they can to meet your goal. But, you'll be wasting your money if, to do it, they sell unprofitable business, offend a lot of customers, or convince customers who would have bought anyway to buy during the contest period. Incentives work best when they focus people on sales, productivity, or quality goals, as well as the steps they can take to achieve those goals.

Companies use tangible incentives, such as merchandise, to distinguish their incentive campaigns from cash compensation or pricing issues so that the campaigns do not become an expected part of an employee's, agent's, or dealer's income. Merchandise is used in business to recognize and thank people for performance in much the same way that people give gifts in their social lives. We tip the doorman and waiter as a bonus for good service; we give gifts at holiday time or other occasions as a personal sign of appreciation. Nothing beats cash as a form of compensation or bonus, but it's a poor way to demonstrate appreciation for people who have gone the extra mile for your company, and it's dangerous if your company does not intend to run incentive programs on a regular basis.

Finally, incentive programs cannot mask problems caused by shoddy products, poor management, or misguided marketing.

STEP 2: IDENTIFY THE GOALS OF YOUR INCENTIVE PROGRAM

In concrete terms, define what your company wants to accomplish with respect to a designated area, such as sales, unit volume, defect percentages, or customer satisfaction. Make sure that you can translate the goals into numbers measurable from one comparable time-period to another. Sample goals: Increase sales by 10 percent in dollars in the fourth quarter versus the fourth quarter a year earlier; decrease the number of product defects from 2 percent to 1 percent of production; increase percentage of repeat customers by 10 percent next year versus this year.

List the internal and external factors that could affect your goal, such as competition in the marketplace, introduction of new technology in your manufacturing process, a major new advertising campaign, or labor problems resulting from an expired union contract under negotiation.

Review your company's overall goals, as well as its mission statement, to make sure your goals are in line with the big picture.

Incentive Planning Worksheet: Spell out in a sentence or two your goals, along with the factors that could affect the outcome negatively or positively.

STEP 3: DETERMINE THE NEED FOR AN OUTSIDE SUPPLIER

If the potential audience for your incentive program involves an annual budget of $50,000 or more, chances are you can get help from one of about 100 to 150 incentive companies and agencies that handle incentive programs. Otherwise, your company will probably have to use its own resources to run the program. (See 3010 and click on Types of Suppliers)

STEP 4: DETERMINE THE PEOPLE WHO CAN MAKE THE DIFFERENCE

Specify the people inside or outside your organization who can have the most impact on achieving your goals, such as internal salespeople, dealers, dealer salespeople, production employees, and delivery personnel.

Incentive Planning Worksheet: List the people by title, function, or name, depending on the size of the company. Provide a description for each group involved with your program, including your estimates of their demographics, interests, hot-buttons, problems, etc.

STEP 5: INVOLVE ALL THE PEOPLE WHO COUNT

After identifying the people who can help you meet your goals, meet with them to find out:

* is your goal feasible?

* what is standing in the way of your meeting it?

* what actions can these people take that could help you meet your goal?

* how can they measure or monitor the quantity or quality of those actions?

These meetings work best when chaired by an outside facilitator who knows how to draw out each participant and ensure that the findings represent a consensus. No more than eight people should participate in this sort of meeting. This process should yield recommendations on:

* what you or the company can do to achieve the goal, i.e., increase advertising, improve research, obtain new technology;

* what the people involved can do, i.e., make more sales calls, learn new assembly line techniques or, in the case of retailers, put up more displays;

* how you can measure their progress.

If your incentive program is part of a long-term effort to make your people more performance-driven, you may want to conduct a written survey that measures their morale, knowledge, interest, demographics, and lifestyle.

Incentive Planning Worksheet: Spell out the findings of this process, organized by what your company can do and what the target audience can do to achieve your goals. Make sure you note those obstacles perceived to be standing in the way of success.

STEP 6: DETERMINE YOUR OVERALL INCENTIVE STRATEGY

Here's where you specify your goals and what people must do to achieve them. You must also identify the time frame of the program and attempt to estimate the sales or profit value of the anticipated goal.

Also, be sure to look at the problems or obstacles identified in Step 5 and determine the extent to which you can address them. If you can't address any of the problems identified by your group, you'd better reduce your goal.

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