20 tips for an effective reward system
Setting goals for awarding prizes to teams is a highly sensitive topic If they are done well and - just as importantly - if they are well communicated, we can make them an incredible driver for productivity and quality of work. If they are poorly designed, we run a serious risk of high demotivation. It is worse to have a poorly built incentive system than to have nothing at all and let people do their job without that encouragement.
1
It must be linked to the organization's strategy.
f the organization or service strategy is very focused on sales, for example, it makes sense that the incentive system is also turned to sales. Having ten completely different goals of which only one is for sales does not make any sense to an organization that has this service focused on increasing sales to customers. The same happens for example if we are talking about a company that wants to have an excellent, highly personalized service. It does not make any sense in this context to say that the main objective is the service time.
2
Must be linked to your performance evaluation system
Usually companies have an evaluation system - annual, for example - and the incentive systems are something more operational, usually monthly, but they may have a different periodicity. The annual performance appraisal system will have other types of framing objectives, but it cannot be completely outside what the objectives of your monthly system are and therefore must be related. They can be complementary. For example, the monthly objectives are more focused on day-to-day practice, on the results achieved, and annually they are balanced with more behavioral issues or questions of attitude towards the team, etc.
3.
Define the access requirements.
Usually, incentive systems are not accessible from the first day a person starts working. It can be either after a month or six, it depends a lot on the type of organization, or on the complexity of the service / product: I can also integrate a specific system to determine product more quickly than for another. All of this must be very clearly communicated to the person. The person must know when it starts to “fight” for the prizes.
4.
Ensure stability of the indicators.
I have witnessed in some companies, systems in which the objectives change monthly. Sometimes the person does not even know what will happen to him in the next month. In one month it can be more qualitative, in the next more quantitative, and after a certain time no one can understand each other and the system no longer has any positive impact, because no one really knows what the priority at that moment. If there is an important new campaign that is temporary, I can introduce a temporary goal, communicated as such. The entire model should not be changed abruptly because of this campaign. Please note that it is perfectly legitimate for the Company to report a change in the target's value. An example: The company is promoting a certain product that costs 50 euros for the final public and suddenly there is a drop in price and it goes to 20. And in fact it has an unbeatable value. It is perfectly understandable that the objective is changed for the assistant who is making the sale. The important thing is that the communication is made clearly and that it explains why it is happening. If I tell a person that I had to sell 5 thousand and now I have to sell 7 thousand, I must explain the reason - “the price has gone down, and the studies we have done predict that it will be easier to sell like this” And this should work both ways: if for some reason it is necessary to increase the price of the same product from 50 to 80 euros, some will probably stop selling and it may make sense to adjust the overall sales value that person has to achieve. Basically, the important thing is that these adjustments are communicated in advance so that the person is not caught at the end of the month failing the result he was already waiting to achieve.
5.
Avoid universal prizes
Prizes that everyone receives are not prizes. If everyone receives the same prize, this is part of the remuneration. And this is how people will view it. When the person receives only for existing, this is not a prize, it can be a different remuneration strategy at best. Mixing with the premium model makes the message less clear and less effective.
6.
Prizes must be ambitious but attainable
Goals must be attainable - anyone who is not supernatural must be able to achieve them. But they are also demanding - which means that there may be people who really cannot reach that value. In other words, it is something that is achievable for the overwhelming majority of people, but you get there if you try. If I normally do 40 with effort I may reach 50, but at 100 I won't even try to reach it.
7.
Avoid plateaus
By level I mean when a certain premium is reached when a certain level is reached. The result is that productivity will drop sharply as soon as the goal is achieved. It is also the safest method to promote fraud, by promoting the exchange of sales within the team, the manipulation of dates, etc. This is clearly counterproductive - it makes half the team sleep half the time. The worker is part of the month moving and the other part of the month is quietly maintaining his job. If it is to achieve such a level, then you are throwing money on the street and causing behaviors that are not what you want for your team. Replace the thresholds with proportional values or you can even define a minimum value, but in, that the premium continues to increase after that milestone.
8.
Define clear goals that depend on your own
Defining the goal of “having a better team spirit” is subjective, it depends on the interpretation of other people. The result is to demotivate anyone with this goal in mind. Define tangible objectives such as the number of sales, the value of sales, the number of orders processed, closed tasks, etc. Something that depends to a large extent on the person himself.
9.
Find complementary but not contradictory goals
The objectives are contradictory when the employee in front of the two does not know what behavior they should behave. When this happens, it is most likely that you will not do any of it properly. If the sale has a very clear objective and, at the same time, a very strong objective of service time, in a product that admittedly requires a lot of time on the phone to make the sale, so in this case it is better not to have these goals. Or give a weight much higher than one of them, the one that is most important to the company, in this case it is presumed to be the sale. If the sale has a much higher weight but the service time is also there but with a much lower weight, the focus of the seller will be on the sale but with attention to time. If the weight is too much, the result will be bad accelerated sales or simply the employee giving up on goals. So what are complementary goals? For example, the number of products sold and the value of the products. If I have only one of them, I am benefiting either the seller who sells a lot but the products of lesser value, or the seller who sells little but what he sells is more expensive. The combination of both is logical and healthy, making the first one try to sell higher value products and the second one to try to sell more often. So they are complementary - they do not cancel.
10.
Simplify
Have as few goals as possible - one, two, three, ... If you are 15, no one will understand what you want. Complex grids and advanced formulas that no one can explain are the formula for failure. The employee reaches the end of the month and does not know why he received one hundred euros or five euros because he does not understand the basis behind the result. The perfect formula makes the manager happy because everything that matters there is included. But as no one understands it, it has no practical effect and still ends up spending money unnecessarily.
Setting goals for awarding prizes to teams is a highly sensitive topic If they are done well and - just as importantly - if they are well communicated, we can make them an incredible driver for productivity and quality of work. If they are poorly designed, we run a serious risk of high demotivation. It is worse to have a poorly built incentive system than to have nothing at all and let people do their job without that encouragement.
1
It must be linked to the organization's strategy.
f the organization or service strategy is very focused on sales, for example, it makes sense that the incentive system is also turned to sales. Having ten completely different goals of which only one is for sales does not make any sense to an organization that has this service focused on increasing sales to customers. The same happens for example if we are talking about a company that wants to have an excellent, highly personalized service. It does not make any sense in this context to say that the main objective is the service time.
2
Must be linked to your performance evaluation system
Usually companies have an evaluation system - annual, for example - and the incentive systems are something more operational, usually monthly, but they may have a different periodicity. The annual performance appraisal system will have other types of framing objectives, but it cannot be completely outside what the objectives of your monthly system are and therefore must be related. They can be complementary. For example, the monthly objectives are more focused on day-to-day practice, on the results achieved, and annually they are balanced with more behavioral issues or questions of attitude towards the team, etc.
3.
Define the access requirements.
Usually, incentive systems are not accessible from the first day a person starts working. It can be either after a month or six, it depends a lot on the type of organization, or on the complexity of the service / product: I can also integrate a specific system to determine product more quickly than for another. All of this must be very clearly communicated to the person. The person must know when it starts to “fight” for the prizes.
4.
Ensure stability of the indicators.
I have witnessed in some companies, systems in which the objectives change monthly. Sometimes the person does not even know what will happen to him in the next month. In one month it can be more qualitative, in the next more quantitative, and after a certain time no one can understand each other and the system no longer has any positive impact, because no one really knows what the priority at that moment. If there is an important new campaign that is temporary, I can introduce a temporary goal, communicated as such. The entire model should not be changed abruptly because of this campaign. Please note that it is perfectly legitimate for the Company to report a change in the target's value. An example: The company is promoting a certain product that costs 50 euros for the final public and suddenly there is a drop in price and it goes to 20. And in fact it has an unbeatable value. It is perfectly understandable that the objective is changed for the assistant who is making the sale. The important thing is that the communication is made clearly and that it explains why it is happening. If I tell a person that I had to sell 5 thousand and now I have to sell 7 thousand, I must explain the reason - “the price has gone down, and the studies we have done predict that it will be easier to sell like this” And this should work both ways: if for some reason it is necessary to increase the price of the same product from 50 to 80 euros, some will probably stop selling and it may make sense to adjust the overall sales value that person has to achieve. Basically, the important thing is that these adjustments are communicated in advance so that the person is not caught at the end of the month failing the result he was already waiting to achieve.
5.
Avoid universal prizes
Prizes that everyone receives are not prizes. If everyone receives the same prize, this is part of the remuneration. And this is how people will view it. When the person receives only for existing, this is not a prize, it can be a different remuneration strategy at best. Mixing with the premium model makes the message less clear and less effective.
6.
Prizes must be ambitious but attainable
Goals must be attainable - anyone who is not supernatural must be able to achieve them. But they are also demanding - which means that there may be people who really cannot reach that value. In other words, it is something that is achievable for the overwhelming majority of people, but you get there if you try. If I normally do 40 with effort I may reach 50, but at 100 I won't even try to reach it.
7.
Avoid plateaus
By level I mean when a certain premium is reached when a certain level is reached. The result is that productivity will drop sharply as soon as the goal is achieved. It is also the safest method to promote fraud, by promoting the exchange of sales within the team, the manipulation of dates, etc. This is clearly counterproductive - it makes half the team sleep half the time. The worker is part of the month moving and the other part of the month is quietly maintaining his job. If it is to achieve such a level, then you are throwing money on the street and causing behaviors that are not what you want for your team. Replace the thresholds with proportional values or you can even define a minimum value, but in, that the premium continues to increase after that milestone.
8.
Define clear goals that depend on your own
Defining the goal of “having a better team spirit” is subjective, it depends on the interpretation of other people. The result is to demotivate anyone with this goal in mind. Define tangible objectives such as the number of sales, the value of sales, the number of orders processed, closed tasks, etc. Something that depends to a large extent on the person himself.
9.
Find complementary but not contradictory goals
The objectives are contradictory when the employee in front of the two does not know what behavior they should behave. When this happens, it is most likely that you will not do any of it properly. If the sale has a very clear objective and, at the same time, a very strong objective of service time, in a product that admittedly requires a lot of time on the phone to make the sale, so in this case it is better not to have these goals. Or give a weight much higher than one of them, the one that is most important to the company, in this case it is presumed to be the sale. If the sale has a much higher weight but the service time is also there but with a much lower weight, the focus of the seller will be on the sale but with attention to time. If the weight is too much, the result will be bad accelerated sales or simply the employee giving up on goals. So what are complementary goals? For example, the number of products sold and the value of the products. If I have only one of them, I am benefiting either the seller who sells a lot but the products of lesser value, or the seller who sells little but what he sells is more expensive. The combination of both is logical and healthy, making the first one try to sell higher value products and the second one to try to sell more often. So they are complementary - they do not cancel.
10.
Simplify
Have as few goals as possible - one, two, three, ... If you are 15, no one will understand what you want. Complex grids and advanced formulas that no one can explain are the formula for failure. The employee reaches the end of the month and does not know why he received one hundred euros or five euros because he does not understand the basis behind the result. The perfect formula makes the manager happy because everything that matters there is included. But as no one understands it, it has no practical effect and still ends up spending money unnecessarily.
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