What are Your Incentive Plans REALLY Doing?
Last week, Comcast won the award for worst customer service. The recording of a Comcast customer trying to cancel his service – only to be harassed for over 8 minutes by a Comcast agent – went viral, and needless to say Comcast has experienced a pretty tough week. While at first it seemed like an agent gone bad, Comcast has since confirmed that agents are financially incented to retain customers. While this agent certainly didn’t show much compassion, he was trying to do what his company rewarded him to do.
In my corporate days, I probably prepared more than 50 incentive plans, and while that doesn’t make me an expert, it certainly provides me with some lessons. This Comcast snafu reminded me of the most important lesson I learned from creating, then adjusting, scrapping, re-creating incentive plans:
Whenever you incent a person to do something, you are also dis-incenting them to do something else.
Here are a couple examples from my experience:
- A newly launched product was moving more slowly than we wanted. We created a short-term high-impact incentive to encourage our sales team to sell that new product. While sales of the new product increased, the sales team lost focus on the company’s bread-and-butter products and sales dropped drastically.
- Another incentive encouraged our team to sell longer-term service contracts over shorter-term contracts. Seemed logical. What we didn’t plan on was a longer approval cycle which delayed any service contract revenue coming in – short or long term.
As you can see, I most often stumbled by incenting sales of one product or service, or even a product line, at a different rate than others. If a sales rep knows they will earn $25 every time they sell product A, and $50 every time they sell product B, they will try for product B every time. Who wouldn’t? If any of your staff’s pay is performance-based, here are some pointers:
- The decision to award an incentive payment upon the sale or upon collection is often debated, and rightly so. Define your sales team’s role clearly; sales only? Do they have credit granting authority? Or, are they responsible all the way through collection?
- Be careful that your incentive structure does not put one employee against another. Having a maximum incentive pool can cause this; define the split to guard against too much competition.
- The most important question to ask with every incentive payment is this, and you must ask it every time: By encouraging a particular behavior by my employees, what might I discourage them from doing? You must think like an employee on this one or you will be caught off-guard again and again (trust me, I learned that the hard way).
I love incentive and performance pay, but just be sure that you are comfortable with not only what you are encouraging your staff to do, but also with the behavior you are discouraging. If you don’t believe me, just ask Comcast.