Defining and awarding incentives

- People do what they get paid to do. If incentives aren't aligned with your goals and strategic outcomes you're not going to get the results you want. After you've defined the initiatives you want to pursue, laid out the priorities for the organization, and set goals you have to link individual and team incentives to the successful completion of those activities. This may require changing compensation plans or offering bonuses contingent upon execution of strategic objectives. I had one client that was trying to make a massive culture shift. They were moving from a mindset where it was great to drive sales to one where they wanted to improve margin. Everybody's incentive plan was tied to sales. The organization realized no matter how badly they wanted their sales reps to focus on selling more profitable business, they would never get there if they didn't change the sales compensation plan, so they did. They said, no longer will you get incentive only based on sales. We're also going to measure the profitability of the products and contracts that you sell. Behavior changed pretty fast, and they achieved that strategic objective of expanding their margins. One organization I worked for had a bunch of field technicians. Those technicians were measured on their daily production. How much work did the tech get done in an eight hour period? We said, you know what? Strategically production matters, but we really need to focus more on retention. We were losing customers, and we said our technicians and the way they interact with customers drives whether a person stays with us as a customer or not. We said, we've got to change the incentive plan. So, we layered on retention on top of their production. We created an entirely new metric called retention adjusted production, and the way that worked was a tech could do a great job and do a lot of production, but if they had really high attrition their production score would get decreased, and guess what? Their incentive went down too. Our techs changed their behavior. They were more positive in interacting with our customers. A lot of them actually increased their retention, and we achieved our strategic goals. Sometimes incentive changes are short term. Others are going to be long term and require the involvement of human resources and the compensation department. Those business partners need a seat at the table when you're setting strategy, not after you've set it, and finalized it. They need to know how the strategy is going to drive performance and then what they can do is advise you on, here are the compensation changes you should make to get the performance that you want. They're able to tie it clearly to incentives. I worked with one client where the human resources business partner is involved in all strategic planning efforts. She has a seat at the table. Her counsel is valuable to the leadership team. When they're setting strategy she's the one who flags for them, hey, this is going to require a compensation change. So, let's really think about how that strategic priority is going to affect the way we pay our people. If want your culture to really drive your strategy and make sure it gets executed you have to make sure the incentives are aligned with that plan.