Sales professionals expect to be compensated based on their results. The more confident the sales professional is, the more they will push for a lower base salary and a higher commission percentage.
But what about the manager, the route technician, the construction superintendent, the factory floor worker or administrative workers? Do variable pay plans work for them, too? The answer is: sometimes.
A local company had fixed-fee accounts and was bleeding money with high levels of customer dissatisfaction. They implemented a promotion, so employees became eligible for an incentive bonus. However, the program was not properly communicated. Most employees only learned why they DID NOT earn it. It took the team six brutal months to implement significant process improvements, erase the losses and improve customer satisfaction ratings. But the complex formula used to calculate bonuses did not account for the improvement from massive losses to break-even, so none of the employees involved received any compensation. In this case not only was the bonus plan not motivating, but it became significantly demotivating.
A similar situation frequently exists in the construction industry when job bonuses are calculated on the job’s financial performance. The contractor assigns his “A” superintendent to a very difficult job with a very slim margin (i.e. little margin for error) and assigns his “B” superintendent to a relatively straightforward job (i.e. healthy margin). Since the bonus is calculated the same way for each, the “B” superintendent gets the larger bonus. When this gets repeated job after job, the company actually rewards mediocrity and punishes excellence.
In order for financial incentives to be effective as a motivator of performance, employees must understand the goals of the incentives and believe they can impact the outcomes. Here is a list of common mistakes companies make when developing incentive bonus plans for non-salespeople.
- They do not consider the unintended consequences. For example, over-incentivizing volume of work can easily result in a drop in quality. An over-emphasis on individual contributions can easily discourage teamwork.
- They assume all people are motivated by money. Some people are more motivated by other things, like work-life balance, than they are achieving that bonus. If you want financial incentives to drive higher levels of productivity, you better hire people who are motivated by financial incentives. Using a pre-employment assessment will tell you how important money and achievement are to a candidate.
- They create entitlements – not motivators. Safety bonuses or attendance bonuses can easily morph into another line on the paycheck that the employee does not really think about. It may not really be motivating them to work safely or to show up for work.
- There is no feedback. Want to get more bang for your bonus check’s buck? Spend a few minutes reviewing with the employee what they did to earn it and how they could get an even bigger bonus next time. Feedback can be just as motivating as a bonus. Owners often overvalue the check and undervalue the feedback.
A well-designed, self-financing incentive bonus or commission plan can indeed provide powerful motivators for your non-sales personnel. Just make sure the incentives are simple to understand with feedback, the employee can control the outcome, is easily calculated and compliant. Contact the Davidson Group to learn more about implementing a rewarding incentive plan for ALL your employees.
