Feature Article - May/June 2010

Measure for Measure

Maximize Value Form Your Incentive Program

By Rick Dandes

Stotz added that one of his key best practices is very basic: making sure that the performance you are trying to achieve is influenced by incentives or recognition.

"Sometimes the problem is not motivation," he said. "Sometimes the problem is actually a systems problem or an equipment problem. I did a project in Europe with a major software supplier. They were not getting their sales force to sell at the rate that was projected and needed. I looked at a variety of issues and found out that the computers the software salespeople had was inadequate and were not full-featured enough to showcase their software product. Our first step was not to improve the incentive program but to get the proper computer update. Make the computers fast enough to keep up with the software. They were having problems demonstrating the software to potential customers."

Meanwhile, researchers at Maritz agreed that there are some bottom-line basic practices or standards that go with measuring ROI for incentive programs. They include looking across the business to see where other groups may have impact or issues that should be considered in the program.

For example, if a sales incentive program is implemented and it's designed to drive 25 percent growth in sales in a company where new accounts require significant support from customer service, but the customer service group isn't informed or engaged in the program, sales growth will be short-lived.

Other best practices include: clearly identifying and reasonably setting program objectives; understanding and accounting for external influences—market, industry and competitors; proactively identifying ways to engage the broadest participant base by asking participants in advance and designing the program to reach the maximum number of participants.

"Programs should set budgets relative to program objectives versus setting the budget first and not properly funding to drive the targeted growth," explained Jennifer Kallery, of Maritz. "More aggressive targets may warrant bigger budgets. Also, ensure program fairness. If program rules are perceived to favor one group or another, participants will disengage and desired results won't be achieved. Objective and rules modeling as part of building ROI models is key."

Consider multiple scenarios that appropriately account for risks. "Monitor and adjust during the program. Look for areas of weak performance and quickly address to capture improvement for the balance of the program," Kallery added.

Monitoring during the program shows management which team members are meeting or exceeding goals at any given time, so they can calculate immediate returns on the program investment. Additionally, and particularly important in a down economy, it enables executives to link program costs to measurable activity costs and periodically observe how the program has affected the overall performance and goal achievement.

All of these suggestions help show executives that a program is actually working.