Wednesday, March 25, 2009

Sometimes You Have to Explain it a Different Way

Incentive compensation systems have become a more common topic in Chief Executive Boards International meetings lately. While incentives are common among sales people, you'd be surprised how they drive behavior in other job descriptions.

I heard a remarkable anecdote last week that underscores this point. I heard it from a general manager of a professional services business, in a sector that's hard-hit by the current economic downturn. He's going all-out to secure new business, but it's become clear that some staff and cost reductions are essential to maintain breakeven.

At a recent company meeting (not a new thing -- he's been doing them regularly), he announced an across-the-board 10% pay cut for all employees (including himself). And then he did a brilliant thing -- he announced that anyone who billed 160 hours in a month (most months have 168-176 billable hours) would earn his 10% pay cut back for that month.

He was stunned when a couple of people came up after the meeting, and said "I think I may be able to find some more billable hours." To his credit, he kept his composure -- I'm guessing what he wanted to say was something like, "And despite the fact we've been struggling to increase revenue for the past 6 months, that idea is just now occurring to you??"

There's a reason for this. Even small groups of employees suffer from "crowd anonymity" -- they think someone else is going to do it, or that you're talking to someone else. When it gets personal -- like, "a 10% pay cut that you can recover if you'll do what I've been talking about", somehow they start to get it.

In this case, this general manager is now getting questions almost daily from a staff that wants to make sure they get their billable hours in, and earn their pay cut back. Suddenly, a group of people who "sort of" understood that the company needed them to bill every hour they could is actually doing that. Amazing -- it took a connection between their wallet and their billings to escalate billed hours per month to the top of their minds.

There's actually a second chapter to this story. He subsequently modified the program to a "sliding scale" that incrementally restores the 10% cut, beginning at 80% of available hours billed, increasing to full salary at 100% of available hours billed. Interestingly, this is a clever way to introduce an incentive program to a previously straight-salary workforce.

So, if your company is in need of employees stepping up to the plate, you may have to step up your communication -- from just asking them to pitch in to explaining it a completely different way. Here's a more thorough article on "Incentive Compensation Systems that Work."

If you've successfully communicated to your employees the need for a major change in behavior, with or without a compensation plan change, please click "Comments" below and share your experience with others.

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Terry Weaver

Chief Executive Boards International

Chief Executive Boards International: Freedom for business owners & CEOs -- Less Work, More Money, More Freedom to enjoy it

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