I SAY, I SAY BY PETER GRAY
LET’S GET B2B INCENTIVES INTO PERSPECTIVE
The current financial situation has made some companies question the use of incentive programs. They see the cost of such programs as an expense rather than an investment and it’s in this regard that they are making a big mistake. Indeed stopping the use of incentive programs now might well make their organisation less competitive in a shrinking marketplace.
In my opinion, if you are already an incentive user it will be a big mistake not to continue to use this highly effective marketing tool! If you’re not currently an incentive user and you’re thinking about whether to join the club, don’t hesitate – join now. Incentives really are the most effective way of persuading people – and certainly your sales force – to achieve things that even they didn’t think possible, to change attitudes and to influence the decision-making process.
I can’t emphasise enough that a well designed and implemented incentive program should cost you nothing! The important words here are ‘well designed’ and ‘[well] implemented’. Think about it. There’s absolutely no point in using any marketing tool that reduces your income…and incentives certainly won’t do that if they’re properly focussed.
To ensure the success of an incentive program use an experienced incentive practitioner to research, design and implement your incentive strategy even if you want to provide your own rewards. The next most important element is for the company – the sponsor – to abide by the rules that have been agreed. If these two fundamental principles are followed the costs associated with the design, implementation and the reward will be more than covered by the incremental rise in revenue produced by the program.
Some regular users of incentive programs become ‘sloppy’ over the years – not applying the program rules strictly – and then wondering why the results are less than they would have desired. If an individual’s target is, say, $100,000 then that is what they must achieve. $99,000 will not do!
Meeting end-of-program targets should only be one element of measurement. Key Performance Indicators (KPIs) should be built-in to be achieved throughout the period of the program to ensure that the participants’ efforts are kept at a constant level. KPIs don’t have to be financial targets; they could relate to personal development, acquisition or conversion of leads and myriad of other elements that are important to an individual’s performance. They could even relate to group success to ensure that peer pressure is harnessed within the program.
Targets should be realistic, not impossible to reach but should require effort over and above that which one would normally expect. Remember that it isn’t only those who achieve targets who will increase revenue. They are the only ones who will receive the reward but those who just fail to meet their targets will also contribute to increased revenue.
Achievements should be judged objectively and not subjectively – that is to say by meeting or exceeding targets rather than as a result of personal assessments. Where someone else’s judgement is involved in a participant achieving – or not achieving – an incentive reward there are always other factors that could be involved: favouritism, professional jealousy, like or dislike, good or bad personal relationships and so on. This will diminish the effectiveness of the program and could lead to de-motivation.
There are ways in which a sponsor can limit the financial exposure of an incentive program. A ‘closed’ program restricts the number of participants that will receive a reward whereas an ‘open’ program will reward all those who meet their target and this number can only be estimated at the start of a program (although if the program has been used in previous years and targets are similar it can be safely assumed that roughly the same percentage of participants will achieve rewards).
A typical closed program will reward only the top achievers whether or not others actually meet or exceed their targets. In a sales force of, say, 400 people the reward could be limited to the top 100 whereas normally you might expect around 240 to reach their targets. This not only limits the cost of providing rewards but also enhances competition between those involved. The gap between the 100th and 101st participants may only be a matter of dollars but only the 100th will receive a reward.
Some words of caution. If you’ve never devised and implemented an incentive program before don’t be tempted to do so now. The pitfalls are many and my company is often called-upon to rescue well-meaning incentive designers from the unexpected results of their efforts. It’s also a false economy because the knowledge and experience of a recognised Incentive Practitioner will, more often than not, be less expensive in the long run.
Peter Gray is the Managing Partner of Motivating People www.motivatingpeople.net
For Speaking availability, Quotes and information email peter.gray@motivatingpeople.netcopyright Peter J Gray Motivating People 2009
