The winning move is to Align the business’s interests with Sara’s.   Now there are a lot of ways to use compensation components to change behavior.   But as Armen learned, they need to be carefully considered.   Perhaps the easiest to implement is defining some sort of bonus pool, maybe a set percentage of profits to be distributed equally amongst all Employees.   Don’t base them annually, there is too long a lag to reap that reward for the behavior modification to be effective.   Quarterly or even monthly work well.   The amount should be not insignificant.   $100 on a quarterly basis may do as much harm as good.   A week’s pay quarterly is a great target.

Okay.   I just heard a bunch of folks fall from their chairs.   Stay with me for a while.   If you’ve got a $40,000 a year employee, that means he or she needs to find $769 this quarter in cost savings or profit growth to make that pay for itself.   That’s about $12 a day.   C’mon, don’t believe they can do it?   Try them.

It is entirely okay to take Employees along on this journey into the unknown, even preferred.   It totally works to roll out a program on a trial basis.   Say, “This is what we’re thinking”.   Most companies aren’t in the habit of involving the Employees in this or many policy decisions, and you’re already getting their interest by including them in the process.   Continuing, say, “We’d like to try this and see if you’re up to a challenge to help hit this performance benchmark.   If you can do it, the program can stay . . .”   The quarterly program can even be structured to be based on a new target each quarter, just don’t get crazy and make these pie-in-the-sky numbers, but making it pay for itself, at least after a couple of quarters, is an easy requirement to ask.  

Want to reduce expenses?   Probably have already asked.   But John didn’t offer that he could fix that desk chair rather than order a new one.   Darlene didn’t stop taking home a few extra office supplies.   Now, perhaps Miguel decides that the package doesn’t need to be overnighted and Maxine pushes that vendor a little for a better price.

Want to raise customer satisfaction scores?   Well you just bought yourself extra attention in the shipping department and on the phones.

Want to raise quality?    With it being this quarter’s target, maybe the production line decides to have a group lunch to brainstorm how to accomplish that so they all take home that payday.   You’ve just created a powerful program that feeds on itself and will deliver results like nothing else you could have done.

Sara, and millions upon millions of hidden cogs in the wheels of commerce like her, hold the keys to unlocking the next great wave of productivity gains.

The Next Great Wave of Productivity Gains

Productivity gains, a measure that is effectively what your revenues are per employee in a current period as compared to a previous period, has been a subject of much misuse in my mind.   Productivity gains grew in the mid-90’s and then again in recent years.   Technology has been the almighty hammer that cracked this nut, many would have you think.   What has been sorely overlooked is that the period has also seen massive job losses, masked in the unemployment numbers by lower-paying service sector job growth.   So, when a company lays off thousands of workers with only a minimal loss of revenue, profits rise and productivity growth looks great, even if the strength of the underlying business has been compromised due to falling customer satisfaction, worsening employee morale, etc.   But that’s all okay, because this revolution will be the opposite, where when what’s good for the Employee turns out to be good for the Company.

Real productivity growth comes from more effective Employees, not a formula that is an unsustainable walking of the plank.   When we make Employee’s partners, part owners in the business, only then can a business reach maximum efficiencies.

There are many ways to implement compensation incentive programs, and, each business being different, no best way.   It is best thought-through.   Don’t pull an Armen and start hacking wildly.   Often, a specific incentive can be so powerful as to cause unseen adverse reactions.   But you can step into this in measured ways with a dialog with your Employees.   You’re looking to open the untapped resources within your Employees, and they can probably help you with this.   You’re better served adjusting that management style to a more collaborative one, anyway.

Perhaps the best first step to consider in evaluating the potential gain of an incentive compensation program is to have a third party conduct an Employee survey.   Done correctly, even a small sampling can provide a better look into the minds of your Employees.   There are few businesses where the Employees are as happy as Management thinks they are.   So, an honest look at where those opinions vary are a great insight into where the gains might come from and how great they could be.

It is all just another example of how little change has occurred in the way most businesses think.   Business today is terribly self-consumed, worried about its problems, and not those of its Employees and Customers.   Change that focus away from itself, involve itself in a higher dialog, and it will find itself taken care of more naturally.

Employees have a lot more to give.   Make them a partner, in how you treat them and how you pay them.   Find Alignment with them where your interests are the same.   The business will be rewarded with an intangible competitive edge.   Employee retention goes up as does customer satisfaction and overall business performance.   Magic, I tell you.

It is part of the coming revolution.   That it is not widely practiced today makes it an even more effective tool competitively.   And it’s wonderful that it will lead a new growth in business productivity gains.   Best of all, though, you’ve improved the quality of life for the Employees.   They are now better paid, more fulfilled, and happier.

Previous Page, An Experiment Out of Control

Page 1, 2

Guided Star Consulting offers high-impact Marketing, Sales & Business Consulting services

Guided Star – Be Different, Get Followed

© 2005-2008 Guided Star Consulting and Tim Brady – All Rights Reserved