in his book The Greatest Management Principle in the World, contends
that "Any behavior which gets rewarded will tend to be repeated." He
advocates paying close attention to how employees get rewarded for performing
(or not performing) the various aspects of their jobs.
Incentive, or performance
based compensation, is nothing new. Commission plans for salespeople
are common because their productivity is so easy to document. But small
businesses tend to eschew these compensations plans thinking that "we're
mom & pop; we're different." In the competitive environment we're faced
with today, you have no choice; you must use every management tool available
to maximize your marketing firepower.
Guerrillas are not
only intolerant of non-performers, but they lavishly reward their
stars, setting a higher standard of excellence for the whole organization.
The problem is how to reward your people appropriately, particularly
if they're not directly responsible for easy-to-measure activities
like sales revenue.
Some simple guidelines
can put this powerful management tool to work for you. The foundation
of an effective performance-based compensation plan is a set of clear
and specific goals for your organization as a whole, for each
functional department, and for each individual employee. These goals
must be objective and quantifiable. For example, "increase inbound
inquiry calls by 10% or to 650 per month by the end of the year" or,
"Achieve an average rating of 4.5 of 5 on monthly customer satisfaction
surveys." Subjective factors, like attitude or good work habits, may
be included in review criteria, but if you can't measure it statistically,
you can't use it as a standard for performance-based compensation. Then
devise methods for gathering data to measure your progress (or
lack of it) toward these goals. What you measure is what you get, so
inspect what you expect.
The first level
of your plan should be directed at the individual, by isolating
the particular behaviors that would produce the desired outcome. For
example, in a consulting practice, pay a $10 spiff every time an employee
asks for and receives a referral from a customer. This behavior, in
the long-run, will result in more people becoming familiar with your
organization, and more people buying.
The second level
of compensation is directed at the group or unit level.
Staff in administrative positions can be set up to share a periodic
bonus upon completion of particular benchmark objectives, like
"reduce the error rate in the shipping department to less than 5% and
share a $500 bonus"
The third level
of your plan is structured to reward the collective. Set aside a fund
to pay an annual bonus to everyone if the business meets it's overall
annual goals. In this way, you reward collective effort as well
as individual initiative, and foster an environment of cooperation and
teamwork. Peer pressure becomes a powerful force in keeping everyone
on their toes.
rewards as well. Recognize employees publicly at every opportunity
for creativity, leadership, or innovation. For many, a certificate,
plaque or small trophy is more motivating than cash. Encourage competition
for these awards by posting individual and departmental performance
statistics where everyone can see them. Heated rivalries often develop
over the coveted "employee of the month" parking space. Even seeing
the sales "thermometer bar" moving up each week can be a powerful incentive.
And reward mistakes.
Create a rotating gag prize for the employee who makes the biggest mess,
the most costly mistake, or the dumbest error. This award should be
presented in an atmosphere of friendly fun; never to punish or embarrass.
Laughing these things off serves two purposes: first it encourages people
to take risks by letting them know that it's OK to fail, and second,
it allow them to "pay their dues" with co-workers, appease their conscience
and get on with their jobs.
argue with results. If a team member goes about achieving their
objective in an unconventional way, reward them anyway. What works for
you may not work for them. Encourage your people to take responsibility
for achieving their objectives, reward them progressively, and stand
back. They will amaze you!