One of the lessons learned early on owning a small business was the power of incentives. We set up an incentive program for the leaders and tried to keep it “simple” 2-3 goals. All were very obtainable and one “stretch” goal. The thought was to reinforces the regular work (quality and quantity) with the simple goals and have a stretch goal for what we really wanted accomplished knowing it would be a little more effort but also exciting. My personal assumption was everyone’s work style was like mine, don’t leave any incentive on the table. What turned out was 3 out of 4 in many of the leaders was enough and they didn’t care to have the extra money. Too much work!!!
We will examine what went wrong and ways to create incentives and minimize disincentives. The incentives became disincentives for the owners since we were spending money on bonus and not seeing the business results. We will look at the reasons behind a good incentive, the expected results, and how to create motivational rewards. More details on the three areas:
1) Why – Step one is to not incentivize work that is part of the core job role and expectations. Anything that is part of the normal expectations is just that, required of the job. By adding additional incentives, it creates an expectation that for just doing the “day job” – addition compensation is now expected. If at any time the amount gets reduced or eliminated, will it create dissatisfaction and lower productivity. If it is part normal role expectations and are they already compensated for that work, no additional incentive required. If not, go to the Targeted Results to define the “above and beyond” expectation.
2) Targeted Results – In commission roles, it is a little easier to define. An Account Exec has a quota. If they overachieve, you can provide a multiplier for over 100%. Other roles may have more MBO, Management By Objective, type of measurements. They are set up to target critical expectation results. What is the outcome you need to drive your business? Is it more cross selling activity, better trained staff, employee retention? Are the measurements clear and the results attainable with some stretch and outside the normal scope of work, if so, go to motivation? If not, think again about the “why.”
3) Motivation – Is the incentive or reward equal to the level of effort required to achieve it? Is the reward something that is motivational? Keep in mind, rewards do not need to be just cash. It could be time off, a paid long weekend trip, gift cards for the persons favorite extracurricular activity. In any case, it must be meaningful to the intended recipient, or it will not create the internal motivation needed.
Think through
Are your incentives aligned with stretch assignments or merely a participation trophy? Are you creating incentives that can be added or removed as needed for the business to drive the results you need or a permanent entitlement for showing up? Incentives can never replace a person being paid fairly for the work they perform. They should not be used as a reward to perform the “day job”. They need to be focused on something that is extra work and is important to the business with an incentive that is motivational and a task that is achievable. Be clear on how long the incentives will be in place otherwise it becomes part of the expected compensation and be viewed as a disincentive once over.
Small Business
About the Author:
Gregory Woloszczuk is an entrepreneur and experienced tech executive that helps small business owners grow their top and bottom line. Gregory believes in straight talk and helping others see things they need to see but may not want to with a focus on taking responsibly for one’s own business. He and his wife, Maureen, started GMW Carolina in 2006.
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