We developed the People + Strategy Roadmap to identify areas of misalignment that curb our clients’ business success. An important aspect of this process is ensuring business systems truly support and square with the big-picture goals of the company.
One area of misalignment that comes up a lot is incentive plans. We all know the saying, “What gets rewarded gets done.” Business owners develop incentive plans with the (very) good intention of rewarding behavior that moves the organization forward.
Before you incentivize, analyze
However, if owners and leaders aren’t strategic about incentive plans, they may inadvertently encourage behaviors that are contradictory to the business goals. You can avoid such unintended consequences by asking two questions:
- What are my company’s long-term goals?
- What behaviors do those goals drive?
(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. Let’s look at some examples.
Goal #1: I need to cut down on overtime!
One of our clients set a goal of reducing overtime spending, so we leveraged our People + Strategy Roadmap and found something unexpected: the company’s incentive plan encouraged the exact opposite behavior. Turns out that, years ago, the business had implemented 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, they ended up working more hours—and overtime hours soared.
It’s important to identify the behaviors to 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.)
Goal #2: I need to increase sales!
An incentive plan for increasing sales—perhaps the most common business goal—rewards folks who move more high-margin products. But hold on. If your co-op prides itself on providing the best products for each customer, the most expensive item on the shelf could be the wrong choice.
A deeper analysis of your long-term business goals (and your customers’ needs) may reveal a different way to increase sales: by serving clients throughout their animals’ life cycle. With this key insight in mind, an effective incentive plan could be tied to long-term customer retention rather than sky-high receipts.
When it comes to increasing sales, here’s an additional red flag. Many suppliers and vendors provide incentives from the manufacturer on specific products (for example, on high-margin products). If you rely on the incentives from suppliers to reward your employees, it forces your team to prioritize the best interest of the supplier, not your business. The behaviors you reward through external sources could actually encourage behaviors that directly conflict with and even undermine your business goals.
(Read about lagging vs. leading goals and why it’s crucial to know the difference.)
Before you announce a new incentive plan, take some time to get specific—and strategic—about the business goals ahead. When you do, you’ll ultimately motivate and inspire your team to think and act in ways that benefit the whole company.
We can help you assess or pinpoint your goals. Email Erin to set up a time, and we’ll provide insights based on our experience with our clients.