Staff incentives provide a tool to increase motivation, shape the way people work and make businesses more productive. But how are they best aligned with hitting targets and KPIs?
Be the Business spoke to several successful entrepreneurs about the way they develop staff incentives, including linking them to company KPIs, the importance of reporting and the value of surprising people.
Linking staff incentives to KPIs
Aligning perks with KPIs helps provide a consistent message about how staff should behave and makes it easier for the leadership team to communicate goals.
Online business WhoCanFixMyCar.com connects garages with consumers. Its 35-person team needs to ensure there’s sufficient amount of liquidity for the service to be useful to both groups.
“Are customers receiving a good number of quotes in a good timescale when they post? If a garage logs in, are they receiving a sufficient level of work? If we get that right the more commercially focused KPIs will flow from there,” explained CFO Fred Parkes.
Key metrics include customer acquisition costs and lifetime value. WhoCanFixMyCar’s staff incentives are wrapped around these KPIs. For example, salespeople might be part of a commission scheme based on sign-up and renewal numbers.
Team-based incentives encourage the promotion behaviour that doesn’t have a direct commercial impact, but helps the business run effectively. The company is growing rapidly and expects to make 15 new hires by the end of the year.
“There’s a series of ten KPIs, over a quarterly basis, to create that incentive pool. Those that are more important to the business are assigned a higher weighting. This includes things like doing the weekly reporting on time,” Parkes added.
“That encourages people to use time in the right way. If all staff incentives are focused on commercial targets then staff time is focused on that, and other stuff doesn’t get done.”
Profit sharing vs. performance-related pay
There is debate over the effectiveness of profit sharing and performance-related pay. Often seen as an essential tool to attract and retain people in sales roles or across certain industries, they can create contentious behaviour and stress.
The Harvard Business Review studied the implications of these two approaches, conducting interviews with 1,293 private-sector workplaces.
“Our analysis showed that performance-related pay was positively associated with job satisfaction, organisational commitment and trust in management. Profit-related pay did not have similar positive effects; in fact, some levels of profit-related pay resulted in employees being less committed and trusting management less,” it said.
The positive impact of profit sharing depends to some extent on the extent to which it’s available. If it’s limited to a select few employees it can create distrust. Performance-related pay can have drawbacks for those select few as well in the shape of added pressure.
Both approaches are useful tools, but require significant thought to implement correctly particular as they tend to be long-term.
The value of surprising people
While linking staff incentives directly to business targets is incredibly effective, there’s room for creativity too.
Rob Law, founder and CEO of child’s travel accessory manufacturer Trunki, said the incentives people aren’t expecting are the ones that can have the biggest impact.
“When people aren’t expecting to get anything that seems to have a bigger impact than having a structured bonus,” said Law. “Obviously the sales team work slightly differently, but across the business that works really well.”
It’s a sentiment that Rising Tide Media director Kerri Watt has used to shape her incentive programme. The business relies on a regular network of 10-15 contractors for PR support, making it important to keep them engaged.
“People working for me are working for other people too. I want to woo them over to me,” she said. “To me it’s about getting to know them. If I’ve had people that work with me that really like gin, so I send them a subscription box. It shows I value them.”
The most effective incentive Trunki has implemented is its summer hours policy, according to Law. It follows naturally from the company’s family-friendly policy of providing flexible hours and the ability to work from home.
“It’s optional but most people sign-up,” said Law. “They come in half an hour early each day and get Friday afternoon off. People really enjoy spending that extra time with friends or family. We’ve done that as long as I remember. It probably started when we got up to 12 employees.”
Trunki now has 80 staff members. It’s important new employees join the company because they believe in its mission, so the incentive isn’t normally mentioned during the hiring process.
WhoCanFixMyCar CFO Parkes developed a peer-voting scheme for the team member of the month to help recognise people’s work.
“That fosters good communication of good things going on within the business,” added Parkes. “It’s not just the recognition of people it’s more about sharing ideas within the business.”
Regular reporting crucial to hit targets
WhoCanFixMyCar has a strict reporting regime that includes sharing performance on a daily, weekly and monthly basis. Daily KPIs are shared in the morning to provide a focus for that day’s activity. Being an online marketplace means they’ve been able to largely automate the production of these reports, but staff are expected to understand, share and act on the information.
Working with Rising Tide Media’s remote staff means it’s crucial Watt share information on performance frequently.
“Communication is key. You have to work on keeping in touch with people and keeping people motivated – but never unnecessarily, only when there’s something to talk about. We use Slack as our team communication, so things don’t get lost in emails,” she said.
Employee behaviour has to change as a business grows. This mean staff incentives need to evolve too.
“These things need refining fairly regularly,” said WhoCanFixMyCar’s Parkes. “The fact we’ve refined our sales commission structure is indicative of this. As the size of the business changes, the way we interact with our drivers and garages changes.”
One such inflection point was when large garage networks began signing up. This meant that focusing on call time wasn’t appropriate. The locations these customers had needed effective onboarding, which took time and didn’t follow the behaviour of the normal sales process.
Creating staff incentives is one of the key levers business leaders have to impact employee behaviour. Hitting targets means giving them the attention they need to promote positive behaviour across job roles, to boost communication and create camaraderie.
It’s useful to think about the KPIs you want to impact and the behaviours and actions that will make a difference. These can easily be combined. Get creative, too. Surprising staff can have a big impact on morale.