If you’ve been following along with this five-part blog series, you know that in successful companies, all business functions are aligned and operating as a single, interrelated, interdependent system.
Because if even one aspect of your organization is out of whack, your company may struggle to meet its goals. To keep your business as stable and solid as well-stacked hay bales, we use Jay R. Galbraith’s Star Model ™ as a framework to ensure alignment across five key areas: strategy, structure, process, rewards, and people.
Today’s topic (and it’s a hot one): rewards.
What are you incentivizing?
At first glance, developing incentive plans seems like a good idea. There’s plenty of truth to the saying, “What gets rewarded gets done.” Savvy leaders want to reward the behavior that moves the organization forward, and nothing speaks louder than cold, hard cash.
Best intentions, however, don’t always lead to best practices—or desired outcomes. In fact, when we partner with clients, we often find their incentive plans encourage precisely the WRONG type of behavior a leader has in mind. Consider these four real-life examples.
Scenario #1: Let’s cut down on expenses
One of our feed mill clients set a goal of reducing their spending. They created an incentive plan to increase productivity by rewarding drivers based on the number of miles driven. As drivers increased their miles to boost their payout, it seemed like the plan was working … until the client realized the drivers’ overtime hours were soaring.
Make sure: It’s important to identify behaviors that will decrease expenses AND increase driver productivity. What behavior do you WANT your employees to demonstrate? What incentives can you implement to encourage THAT behavior?
(Read how to boost employee engagement by tying business goals to behavior.)
Scenario #2: Let’s increase sales (take one)
It’s not uncommon for salespeople to get bonuses directly from vendors (especially the bigger ones), which naturally incentivizes them to push products from those generous companies. However, other brands may have better offerings for your customer—for example, a feed company with products that meet the needs of an animal throughout its life cycle, rather than just at a certain stage. Based on this insight, an effective incentive plan could be tied to long-term customer retention rather than sky-high receipts.
Make sure: From feed to seeds, leaders should incentivize sales teams to help customers make smart, informed purchasing decisions, not simply push products from deep-pocketed vendors.
(Read about lagging vs. leading goals and why it’s crucial to know the difference.)
Scenario #3: Let’s increase sales (take two)
A retail client wanted to sell more products, and a key factor in customer spending was store cleanliness. Their first instinct was to implement a bonus structure around cleaning, because they felt a spic-and-span environment would entice customers and bump up sales. The problem quickly became clear: If the team is busy earning their bonus by sweeping, dusting, and tidying, then who’s focused on helping customers?
Make sure: Are you incentivizing the right behavior, or does your rewards plan actually create a conflict with the business goals?
Scenario #4: Let’s prioritize safety
One of our clients set a goal of having no safety incidents. Great! But … hold on. What behavior does this goal drive? Far too often, it drives the behavior of NOT reporting safety incidents, which is a potentially dangerous situation for everyone.
On the other hand, if there’s an incentive plan around increasing the number of regular safety checks or monitoring how many safety concerns are reported, now your “Safety first” goal is within reach.
Make sure: Take some time to get specific about the business goals ahead. This will help motivate your team to think and act in ways that benefit the whole company.
Create a strategic rewards plan
As you can see from all these examples, leaders must think strategically when it comes to creating incentive plans. You can start by asking these six questions:
- What are my company’s long-term goals?
- What behaviors do those goals drive?
- Based on our current incentive plans, what behaviors are we encouraging?
- Are these the behaviors I want to see from my employees?
(Read how to make sure everyone on the team understands the business goals.)
Once you’ve answered those questions, you can then figure out an incentive plan that’s good for your employees AND your business. When you do, you can say goodbye to teams looking busy but never making real progress. Instead, say hello to people behaving in ways that truly benefit themselves and the whole company.
We can help you assess the changes you need to meet your business goals, from creating strategic incentive plans to developing leaders who can navigate any transition. Sign up for our NEW 2-Week Intensive on Leading Through Change or email Erin to pinpoint your path to growth and success.