Incentive motivation 101-2


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Incentive motivation 101-2

  1. 1. Incentives & Motivation 101 (understanding the successful rules of engagement) (understanding the successful rules of engagement) Chet Trybus, Executive Sales Dynamics, LLC (616) 822-2928 1 2009-2010
  2. 2. Table of Contents Page(s) Business Objectives 4 Purpose of an Incentive Program 5 Incentive Rules to Consider 6 Basic Motivation Program 7 Fixed Award Program 8 Challenge Level Concept 9-10 Certificate Program 11-12 Performance Level Program 13-14 Challenge Mate Program 15-16 Team Awards Program 17-18 Recognition Awards Program 19 Glossary of Definitions 20 2
  3. 3. Business Objectives • Create a vision or end-point of what you want to achieve as a result of your program • Involve as many participants as practical • Design a program that is easily implemented • Insure ongoing communications of the success of this program • Have FUN 3
  4. 4. Purpose Of an Incentive Program? Increase revenues Increase productivity Improve customer satisfaction Reduce errors Reduce expenses Increase customer retention Build customer brand loyalty Organizational goal alignment Plus, many others 4
  5. 5. Incentive Rules to Consider 1. Keep the rules simple, easy to understand 2. Participants must know what they have to do in order to perform 3. Rules should be meaningful, relating to your objectives, the participant’s opportunities and the earning opportunity must be significant 4. The rules, as presented, must be perceived by the participants as fair and the objectives must be attainable 5
  6. 6. *BASIC MOTIVATION PROGRAM This is the most often used rules structure AND it is the most effective. Base programs should include the following concept whenever possible. TIMING Any time period. Normally six to 12 months . . . or on a continuing basis. RULES Each participant is given a measurable individual objective which relates to the client's objectives. A base program percentage of each dollar or unit value (sold/purchased) is established and participant earns this amount from DOLLAR OR UNIT ONE. When participant reaches objective (which can be monthly, quarterly,. annual), he/she earns BONUS award of X percent (a much higher percentage than for the base award). BENEFITS True motivation program ... do this, get that. Measurable objectives give client important data for analysis. Measurable objectives also offer analysis of program's effectiveness. Base payoff allows for frequent reinforcement. Largest share of budget is given for incremental performance. 6
  7. 7. *FIXED AWARD PROGRAM This program is the basic application of having one specific award (trip, Award Credits or special merchandise item) . . for desired performance. TIMING Short program, one to three months, or three to six months. RULES Establish one level of desired accomplishment (i.e., sell $100,000 to key accounts). When participant performs, he earns a set award (i.e., trip to Poland, or color TV or 100,000 Award Credits). Program is normally closed end, however a set payoff of X Award --Credits can be set up for levels of performance (i.e., each $10,000 in - business earns 40,000 Award Credits). Then participant can continue earning as he keeps performing . . .he., each $10,000 earns (open end budget). BENEFITS Allows client to work within fixed budget. Affords client breakage ... any performance over or under award level is not paid. 7
  8. 8. CHALLENGE LEVEL CONCEPT The Challenge Level concept is excellent where you have a discretionary behavior situation such as independent insurance agents who can place their premium business with any company. TIMING Six to 12 months because of the complex nature of selecting challenge and administering the program. Be careful of continuing this type program too long as your participants will reach a saturation level of the amount of business they can give your client. RULES Establish volume levels of performance (10,000 - 15,000- 20,000) in units or dollars. Participant chooses which level they feel they can earn .. the higher the level the higher the payoff. When participant reaches their selected level, they earn the award for that level (trip or Award Credits). If participant does not reach selected challenge, they drop back one level from actual performance: Example: If participant selected 20,000 as his challenge and - actually did 17,000, he/she would earn the award for the 10,000 level. 8
  9. 9. CHALLENGE LEVEL CONCEPT BENEFITS Program allows participants to select own goal. Motivates participants to stretch giving the client business which they might not have without the program. Good for giving client breakage (non-redeemed Award Credits). Good for use with travel and travel buy-in. 9
  10. 10. CERTIFICATE PROGRAM Certificate programs have been successfully used over the years by companies who have large numbers of participants in their distribution system. Usually best used where there are multiple levels of distribution (Manufacturer - Distributor - Jobber - Dealer). Good for clients who work with their distribution on co-op programs (sharing the cost) for promoting product. Also excellent for companies (or divisions in the same company) who have the same distribution (NAPA) National Automotive Parts Association many manufacturers offering products under the some label). TIMING Continuing program. Has been used successfully as a bonus program ... or spiff activity ... but normal usage is long term. RULES Certificates are produced with a pre-established Award Credit value (i.e., 50). Value of the desired activity is determined and measured in Award Credits . . number of certificates earned (tire sale earns $2.50, five certificates). When participant performs desired behavior . . he earns certificates. Normally, certificates are issued as follows: Manufacturer sends certificates to Distributor and bills for half the cost... based on issuance. Usually based on Distributor purchases. 10
  11. 11. CERTIFICATE PROGRAM CERTIFICATE PROGRAM (continued) Distributor sends certificates to Jobber and bills for a portion of the cost . . again based on Jobber purchases. Jobber awards certificates to Dealers based on purchases at a pre- established rate. BENEFITS Good where there are a large number of participants difficult for Manufacturer to reach. Requires limited administration by the Manufacturer. Good for multilevel distribution . . . sharing the cost. Good for low budget programs (Manufacturer can generate dollars in program by sharing). Good where flexibility in making awards is required . spiffs, seasonal selling situations . . . discretionary selling power at consumer level. Generates a positive cash flow for the manufacturer . good in times of high interest rates. Can invest money collected from Distributors on issuance .. but Manufacturer doesn't pay until certificates are redeemed. Most certificate programs don't begin generating significant redemptions until the second or third year of the program. Company must make long term commitment . . . Excellent breakage . . most certificates redeem somewhere in the 75-80% range after three to five years. 11
  12. 12. *Performance Level Program This type of program is also known as a Pyramid or Performance League Program. It is excellent where you want to place emphasis on your high volume participants ... and also want to offer an award earning opportunity to your smaller volume participants. TIMING Three to six months, six to 12 months. Is more effective for a longer period since competition is involved. RULES Levels of performance are established, based on the numbers of participants Number of winners per level is predetermined . . . normally the same number for all levels (top level can be all win). Based on the participant's previous performance . .. they will compete for the awards in a specific level. Normally established on a past year performance PLUS a percentage increase for growth and inflation. The higher a participant volume level . . . the greater the odds of winning in the competition (percent of winners not announced). Example: Top Level 20 of 20 (All participants win) Second Level 20 of 100 participants win Third Level 20 of 200 participants win Fourth Level 20 of 750 participants win Fifth Level 20 of 1,250 participants win 12
  13. 13. *Performance Level Program BENEFITS Excellent for fixed budget especially travel programs where planned numbers of participants are important. Good where you want to be certain large volume participants are rewarded. Can be used to allow participants choice of level where they want to compete (selected level cannot be lower than objective volume). 13
  14. 14. Challenge Mate Program The Challenge Mate concept is good where you have high level participants (Distributors) who are difficult to motivate with standard awards . . . and who are familiar with one another. TIMING One to three months, three to six months. Shouldn't run much longer as participants lose interest. RULES Participants are paired up based on volume. Participants compete with their Challenge Mate . . . winner takes all. Standings are reported on a regular basis and communication between participants is encouraged. At end of program, the participant who has won earns the award (one-half earn awards). BENEFITS Good communications program .. adds excitement when run in conjunction with base program. Good for high level participants . . not motivated in the normal way. Excellent where peer group recognition is important. 14
  15. 15. Challenge Mate Program BENEFITS Excellent for fixed budget especially travel programs where planned numbers of participants are important. Good where you want to be certain large volume participants are rewarded. Can be used to allow participants choice of level where they want to compete (selected level cannot be lower than objective volume). 15
  16. 16. *Team Awards Program Team Award program is great where you have a group of participants who cannot be measured on individual performance but who can perform as a team. This is especially good for employees with difficult or non- measurable activities such us people who work in Service Departments. TIMING One to three months, three to six months. Can be run longer ... but it is difficult to sustain interest for more than six months. RULES Fixed Award value will be established for desired performance. (This can be open end if the attainment has the potential to escalate). When team accomplishes objective, each member of the team earns award. Awards can be established on individual influence (i.e., the Service Manager might get $100 and the remaining members of the team get $50). Award pool can be established and team members may share equally or awards can be based on individual qualifications (participants earn percentage of the pool). For example, the Service Manager can earn 30% of the award and each other member of the team earns 15%. Teams can also be used in competitions. Example would be Sales Regions ... where the top performing Region earns an award for each of that Region's team members. 16
  17. 17. *Team Awards Program BENEFITS Good fixed budget award. Excellent where individual performance is difficult to measure. Good where peer pressure can be effective. Can also be used to help reduce turnover by making longevity a requirement for the award. 17
  18. 18. *Recognition Awards Program Recognition awards are an excellent tool for motivating participants (even though they don't fit under the standard definition) . . for a small fixed budget. TIMING Year, six months . . length of program. RULES Performance being measured for recognition is established i.e., highest percent against objective, highest $/units over objective, number of new accounts, etc. A fixed award such as a statue, plaque or other special-recognition item is selected . . . and communicated to the participants. Normally based on top performance.. . much better if it is strictly measurable (rather than subjective on the part of management). Can be just a top award . or two or more levels of awards. BENEFITS Good motivator for low fixed budget. Lasting symbol of accomplishment . . can be talked about. Recognizes top performance . . key to success. 18
  19. 19. Glossary of Definitions OPEN END BUDGET • Participants continue earning awards as long as they perform the desired behavior. CLOSED END BUDGET • Fixed budget available and awards are designed to remain within that budget figure no matter how great the participants' achievement. CONTEST • Limited number of contestants have a chance to win an award . based on Top Performers winning. (The key word here is win). SWEEPSTAKES • Limited number of awards are offered. Drawings are held and participants win only when name is drawn. (The key element here is chance). MOTIVATION PROGRAM • All participants have opportunities to earn awards based on performance. (The key element here is all earn best programs are based on individual performance). 19
  20. 20. Glossary of Definitions (cont) GAME • Participants have the opportunity to win awards based on their participation in a game, related to program performance. (Key here is a win game is normally a communications tool, rather than motivation). • Additional award opportunities offered during program. FAST START ACTIVITY • Activity designed to get participants involved and/or participating as early as possible in a program. FAST FINISH ACTIVITY • Activity designed to step up performance in last part of program. 20