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Could technology hold the key to motivation & retention of employees? |
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 The economic market is signaling a renewed focus on growth, although
this is good news, there is concern that demographic trends point to a shortage
of talent. Motivating and retaining the
workforce and in particular top talent, is paramount as this in turn means
increased productivity and sales.
On the surface, this statement may
appear obvious; employee reward programmes are not a new concept. However leading edge companies today are
taking a more strategic approach to incentives not only to motivate and retain
top talent but also to increase sales performance through reward.
Technology's role in accelerating productivity
gains, in order to sell more has advanced dramatically, most notably, according
to analysts Gartner, in the area of Incentive Compensation Management.
Today variable pay is referred to
as Incentive Compensation Management or ICM, embracing all aspects of reward
for pay performance programmes. This
might encompass incentive schemes, commission and bonus pay as well as general
incentives and non-cash based prizes. Compensation is a proven productivity driver for
employees, however the adoption of expert software to expedite
and measure the process is surprisingly slow.
This is intriguing given the significant savings these systems can
introduce.
Traditionally, Incentive
Compensation Management has rested with the finance department because of the
number crunching element to variable pay.
However, by its very nature, ICM is overlapping with other departments,
most notably HR and Payroll. This is
because it not only embraces
strategy and drives performance through reward, it also revolutionises the
assessment, development and compensation of employees.
Analysts, such as Human Resource
consultants Mercer now recognise incentive-driven organisations achieve real
benefits such as, focused employee activity and behaviour, increased
productivity potential and attraction and retention of top sales talent. So in short, getting the incentive and reward
element right can make the difference between profit or loss.
This
is especially pertinent when the following figures are analysed:
- 5-12% is the
figure analysts estimate is overpayment on the annual compensation budget
- Tracking and
reporting compensation for a single employee can cost as much as £1000 or
($1800) annually
- Between 1-4 days
per month on average is spend per sales person re-calculating compensation
payments
- 1.5 x base salary
is the typical cost of replacing a sales person
Why is ICM so overlooked?
Most companies,
certainly in Europe, still rely on
spreadsheets and homegrown systems to administer the incentive compensation
process. In principal, these tools are
adequate and do a good job. However, ICM
software automates the process of creating and maintaining incentive schemes as
well as the calculation and reporting on commission and bonus spend. ICM is effective because it significantly
reduces the likelihood of commission overspend and unnecessary administration
overhead.
Real-time systems
integrate with HR systems introducing workflow management as well as
authorisation controls for payment and statement release. The benefits to HR
are: control of the commission strategy by implementing
plans appropriate to employee roles and aligning productivity with overall
business targets and objectives.
Individual
staff benefit directly from the implementation of an ICM system because they
have access to personal online statements.
These clearly identify where, as an individual they are against target
at any given point in the month, which is highly motivating. In addition any commission and bonus earned
is paid one month in arrears which eliminates the need for shadow accounting
which is rife in organisations which calculate commission and bonus via
spreadsheets where the data is manually input and frequently error ridden.
Incentives can be implemented quickly with an ICM
system, to capitalise on rapidly changing market conditions. The ability to make
adjustments and implement changes quickly means less time is spent responding
to issues reported by the workforce at the end of each pay period. This results in time freed up by reduced
administration effort meaning valuable resource is diverted to analysis,
measurement and strategic planning.
On a
motivational level, managers can view league tables, which demonstrate the
performance of teams as well as individuals.
For key performers or teams, stretch targets can be introduced, which is
highly motivating not only for the individual but beneficial to the
organisation as a whole. Personal
objectives can easily be aligned to business goals to motivate and tie
performance to company profit objectives.
One of the key motivational areas for employees is how
effectively the incentive scheme is communicated and understood and how
performance is reported and measured against each scheme. Inappropriately targeted incentives, late or
inaccurate payments, unexplained adjustments and unreliable reports breeds
distrust and creates a sense of disillusionment amongst employees and
teams.
Cable & Wireless one of the world's leading
international communications companies is an excellent illustration of how an
Incentive Compensation Management scheme can positively impact employee
motivation.
An incentive
compensation solution was implemented to address the challenges Cable &
Wireless faced which included a fragmented commissions structure, high
dependency on spreadsheets to record commissions and a significant headcount to
manage the process. In addition to
unproductive time spent querying commissions paid, a high level of individual
queries and issues with existing controls resulted in overpayments. Coupled with limited visibility and financial
analysis to assess commission claims and limited analysis and reporting on
performance.
The results of the
ICM implementation exceeded expectations.
The first six months of operation in 2005 the company showed
double-digit growth in comparison with the same period the previous year.
August in
particular was a key. Traditionally a
quiet sales month, an incentive was needed to motivate and boost
performance. Within eight hours a new
incentive was devised and implemented to go live on 1st August. The web-based incentive management software
made this possible and as a result Cable & Wireless' order in-take doubled
compared with the same month the previous year.
The key here is the sales team
understood their commission, the impact it had on them personally and on the
business as a whole. Whilst the majority
of employers use some form of incentive scheme as part of their remuneration
strategy, many cannot identify exactly how the incentive motivates people,
whether or not the scheme is effective or if they are paying too much or too
little. Design and modelling of
commission schemes are vital because sales people need to be able to see what
they are earning and to focus their behaviour.
In this way incentives need to be in line with business objectives and
sales staff need to understand the business focus.
To conclude, ICM is proven to pull
together vital parts of the business to promote growth of the company and the
personal growth of its people.
Jo
Walker is the Managing Director of Practique, Europe's
only specialist vendor of ICM software.
For more information please visit www.practique.co.uk.
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