Feature Article - March/April 2015

Before You Beginů

Setting Clear Goals for Incentive & Reward Programs

By Rick Dandes

Building an effective incentive and reward program requires serious planning and consideration as well as a commitment from senior management.

Companies often have rigid quotas for salespeople and distributors, which are based on some factor above their prior period performance. These quotas may or may not be realistic, but either way are set by corporate and cannot be altered. In well-designed incentive programs, on the other hand, said Ira Ozer president of Engagement Partners, of Chappaqua, N.Y., "sales management has the opportunity to set goals based on more flexible and potentially realistic expectations for at least some of the participants. Incentive goals can be set for a number of different performance measures, not just attainment of quota, which is a lagging indicator, and some of these can be based on the behaviors we want participants to accomplish that are leading indicators of success. For example, a goal can be created for holding a specified number of new prospect sales meetings each week."

It's always important for sponsors of incentive programs to understand what credible goals are, added Mike Ryan, senior vice president, marketing and client strategy Madison Performance, with headquarters in New York City.

"You want to have a pretty good feel for what the baseline of the organization not only has been but what it is projected to be," he said. "And then work from there to establish goals that reflect true incremental gain."

All too often you bump into people who may not be as connected to the true forecast of the organization and they look at goals in terms of improving performance by generating 'X' times 'Y' more sales. "But in order to win the battle of executive confidence, which is not only a reputational issue but also a funding issue," Ryan said, "it is important for sponsors to truly understand what the organization is projecting in the first place. And then use your incentive program as a way to go beyond that expectation."

Buying In: Senior Management and Stakeholder Involvement

Having the CEO at a meeting will always increase your odds of getting action taken on an incentive or recognition program, given that it's well conceived. However, it's not necessary to have the CEO as long as there are leaders who can make decisions and will be champions for the cause.

Building an effective incentive and reward program requires serious pre-planning and consideration as well as a commitment from senior management.

"We've found that incentive programs have very little opportunity for success if they are not supported by leaders, and those leaders must lead by example themselves," said Michelle M. Smith, vice president, Marketing, O. C. Tanner, Salt Lake City, Utah.

In many organizations, the human resources department owns recognition programs while sales owns incentive programs, so these leaders would be important to have at a meeting, Smith continued. But if the program is specifically targeted to also enhance the corporate or employee brand, marketing leaders should have a voice in the program design. And, it's always useful to have someone from finance at the meeting so appropriate budgets can be created and approved without delay.

An ideal team, Smith said, will bring together resource provider members with a wealth of experience in methodologies for successfully designing incentive and recognition programs to achieve various goals within predetermined budgets and timelines, with client team members who are well-versed in their industry, the program participants, and the technology and operational workings of the organization.

The resource provider will assign a staff of experts skilled in the areas of strategy, marketing communications, measurement, program rule structures, technology, analytics, goal setting, awards, behavioral modification and return on investment. Ideal client team members will have a deep knowledge of the organization's culture, operational procedures, participant demographics, program goals, technology and market conditions that can affect or influence the program.

"Collectively," Smith explained, "this team should possess all the knowledge required to successfully customize a program solution for the client that will fit the culture of the organization, resonate with the participants and achieve the goals set for the program. They will have the expertise to anticipate all the internal and external factors that could positively or negatively influence the program outcome, and will be able to design their solution to accommodate them, if and when they occur."