Home > Ideas > Share the loot fairly!

Share the loot fairly!

I am aware that the title has a negative connotation, but so has the thinking behind decisions that are unfair to one’s own high-performers.

Sales Teams work all year to achieve targets, to win accolades and to earn that extra slice of income called Sales Incentives.

Companies announce Incentive Schemes with great fanfare – there are posters, buntings, handouts and communiqués from the Top Brass and regular reminders from the managers on the booty awaiting the winners. At the end of the year, when it’s time to hand out the goodies clauses and conditions appear out of nowhere saying why the award cannot be given as expected.

I remember an incentive dispute involving a friend who got a huge order in March and since the required products were not in stock billing was not possible; the order was not included in his performance because bills would be raised only in the next financial year – and in the year that followed the incentive scheme announced was for Orders Closed and Billed during the year. My friend was gutted – he sent representations to the Top Management through his Sales Manager but was refused his reward because the organisation made clever use of the term “need to be fair & just” – they said that many employees will have to be given the privilege and such additional payments have not been provisioned.

What the Heads did not realise was that there was a mutiny brewing in the ranks and many disappointed achievers left the organisation soon after the unfair treatment meted out to them.

Haven’t we seen Pirate / Bank Heist movies in which the partners in crime change colour after they lay hands on the money and gang-up among themselves to eliminate a few in order increase own share?

That comparison is a bit stretched – but organisations need to be aware of the harm they can do by refusing the promised dues.

Incentive Schemes have to be defined well.

The targets, the benefits and conditions should be clearly spelt out and informed as soon as the new performance period begins, in order to give the team the whole year to achieve their goals and goodies.

Targets should be set after thorough analysis of market and opportunity

Business Objectives, Markets Conditions, Previous Performance, Size of Opportunity, Product availability and Government Policies that impact the market need to be studied to set a fair target for the year.

– Targets should be challenging but shouldn’t discourage pursuit

Targets are usually set keeping companies business objectives in mind – but they should not be such that the team gets demotivated rather than being excited to go for it.

Reset targets when market conditions change,  but only for the remaining period

Often markets conditions improve due to internal or external factors and it provides a huge boost to sales; companies then reset targets for the entire financial ignoring the difficult period that prevailed earlier.  Such ad hoc ramping up of numbers can be a disincentive.

Downward reset of target is not recommended because there is no room for incentive if the company is unable to achieve business objectives

Some questions that Leadership often ask when it’s time to pay-up:

–          Has the Sales Executive really worked to earn so much?

–           Does the person deserve such a large sum of money?

–          Can we afford to pay so much?

If they felt that the employee has not worked why was he not informed about it earlier; how come they become aware of this while calculating incentives? Deserving or not deserving is an emotional question lacking any logic. The Scheme has conditions and if they are met there is no need for further questions.

The matter of affordance was to be worked out when the scheme was created – if the organisation has a policy on what can be spent to acquire a sale the same can be used as the guiding principle for setting incentive amounts and budgets. Employees can be told in advance that if deep discounts are given for acquiring a sale it can impact their incentive payout – if such details are spelt out at the very beginning there is no room for ambiguity or disputes.

Blaming or penalizing an employee for poor planning by Management can be counter-productive. Let the Incentive Scheme not become a disincentive!

Don’t refuse the carrot and get the stick!

Incentives Schemes are created to drive performance – they motivate employees to go for more. When the good work is down the goodies need to be handed over with a lot of fanfare and appreciation. Fair treatment will promote further improvement in performance.

  1. May 26, 2012 at 2:13 am

    That is a cogent and thought-provoking post on incentives. The title does pack a slap of irony. The Catch-22 of your friend that you described above would not be the only incident of that kind. Unfortunately, the organisations remain remorseless afterwards too, pressing forth the logic that some things have to be done for the greater good.

    • JayadevM
      May 26, 2012 at 4:01 am

      Hi Umashankar,

      Thank you for stopping by .. Yes! Many organisations love doing that even at the expense of disappointing their employees; and then they complain about “turnover”!

  2. Shibu
    May 26, 2012 at 6:59 pm

    This will remain as an evil for most of the organisations and the sales folks…..

  3. Jamy
    May 27, 2012 at 6:40 am

    Very relevant topic Jay!

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