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As a trainer and consultant, I am often asked for advice about my client’s incentive benefits. Should they have one? Is it too generous, too cheap? How or when is the best time to implement a program?
It is important to point out here that I work internationally, and each country has a different expectation of compensation. The industries I work with the most often are luxury hospitality, sales, and restaurants – each with their own rules and parameters. Virtually everyone I am in contact with work long, hard, sometimes grueling hours, and most (other than the principals) are not highly compensated.
If you have a company or lead a team, you might need to adapt these responses to your own circumstances. Generally, here are the most frequent questions I am asked and my advice for you to consider:
Q: Should I implement an incentive program for my team?
A: Yes. If you want your employees to work efficiently, if they are in sales, and/or if you would like to know who on your team is maintaining the company’s success rates.
Q: Should I pay the entire team a bonus if they hit a targeted goal?
A: No! Paying everyone the same amount defeats the purpose of an incentive. Employees who work harder and get better results should make more. If everyone makes the same, why should anyone try to stand out? Also, it is my experience that targeted goals are arbitrary at best – impossible to hit at worst. It is very de-motivating to a team to be given a made-up goal.
Q: Shouldn’t I set goals?
A: Yes and No. Corporations (especially if they are management companies, have shareholders, or are publicly traded) need to set a budget for business purposes. Hopefully this is based on factors such as past history, future expectations, and actionable measures. Often however, targets are set based on false expectations of what the interested parties want to see happen and numbers changed after rounds of negotiations that get farther and farther from reality. Regardless of these numbers, it is more important that the team be given the opportunity to perform as well at they can. If you set a goal, it could become a ceiling. The truth is, no one knows how well they can perform. Let them find out.
Q: What’s your opinion on sales contests?
A: If there is a specific goal for a limited amount of time, and you would like to conduct a sales contest- fine – but I am not a fan. Contests are another word for game, and work is not a game. What’s more, workers are adults and typically work for money because they need to. Presenting their pay as a game does not strike me as a good idea.
Q: What’s your opinion on ‘giveaways’ or prizes instead of monetary incentives?
A: I will answer that one with a question, “What if your boss decided half your paycheck would be paid-out in scented candles?” Also, please refer to the previous point’s answer.
Q: How do I make sure that no one accidentally has a great month and I get stuck paying out a huge amount?
A: To be financially responsible to all involved, including the owners of the business, set a monthly maximum (cap or ceiling) that each person can be paid out. In the U.S. and Western Europe, it is typically one third of their salary, in other parts of the world it is up to double the employee’s salary. Example: A reservations sales agent who sells between $1-$1.5 million per year via telephone might be paid out as much as $24,000 per year in incentive. Money well spent.
Here are a few questions that NO ONE asks, but should-
Q: How should I communicate my employee’s incentive each month?
A: Each month, meet with the employee privately and go over their ‘numbers’ and performance individually. Look at their conversion, sales statistics, successes, challenges, project status, and listen to their feedback as well. Then go over the incentive points, explaining how the employee is progressing. If you have too many employees to meet with individually each month (congratulations on your success) then this is a great opportunity to delegate assistant managers and supervisors to take on each month. They will develop leadership skills and have a better understanding of their direct reports as an added bonus.
Q: Should I post the top earners names and statistics each month as a way to motivate others?
A: No. You may have heard the saying, “Praise in public, punish in private?” My motto is to praise and punish in private. Remembering that the team is made up of adults, you will undoubtedly uncover childish behavior when sharing performance results on a bulletin board. Sharing the team’s performance as a group is motivating however – especially if there is a chart that compares growth year over year for them to see.
Q: Should the employee’s performance impact their ability to get promoted?
A: YES!!! I know, you are thinking that this is a simple and obvious question, right? Well I am sad to say that it is not. It is not simple, and often is not done. Many people promote employees because they have been in the company the longest, they are the most fun to work with, and frankly, MOST managers I know have no idea who their top performers actually are on their team. (Hint: they are usually sitting quietly in a corner being ignored.)
Perhaps you are one of the many people I am referring to? Perhaps it is time to look at your team not as a whole, but as a group of individuals – each with their own challenges and strengths. They are waiting for you to notice them and to develop their careers. If you don’t, someone else will!