How to incentivize your employees

3 Ps of establishing a mutually beneficial reward program

By Jeff Sheets

I speak with dealers all the time about incentivizing their employees. I like the word “incentivize” because it is a verb and an action word. Sometimes, dealers look at it as a burden instead of an opportunity. I’ve received the following responses that reflect that type of attitude. “We tried that once, and it didn’t work,” or “That is a lot of hassle to figure out something additional on top of their salary,” or “I pay them a good wage, so shouldn’t that be enough?” While these responses are valid, I think that the problem lies in the word “incentive” itself. Instead of calling them “incentive programs,” I like to think of them as “reward programs” that allow us to “incentivize” individuals or teams for producing more profit for the company and making them stretch to reach for a goal. This is a win-win situation for both the employee and the dealership. A study conducted by the SITE Foundation gives us a little insight into these reward programs and how well they work.

Some interesting findings in the study include:

* Programs aimed at individual workers increase performance by 27 percent.

* Programs aimed at teams increase performance by 45 percent.

* Programs have an equally positive impact on both quality and quantity goals.

* Programs structured with employee input work best; however, only 23 percent of programs were selected with employee input.

* Long-term programs are more powerful than short-term programs (44-percent gain vs. 20-percent gain).

What is the takeaway from this information? Reward/incentive programs do work. I think it is statistically significant that team goals increase performance 18 percent more than individual programs; employee input can make reward programs more successful, although very few employers actually involve their employees in creating these programs; and long-term programs are better than short-term programs. If I were you, I would be taking this information and using it to make your business more profitable!

What rewards work? Here are the 3 Ps of rewards that will incentivize your employees. (It’s not all about money, but that does work!)

1. Profit/sales incentives: These are particularly useful when you know that you are not reaching your potential in a given department. I like to target the Service Department for this type of compensation in most dealerships. If your technicians are not 100-percent efficient, then I would be looking to motivate them any possible way to get them there. I have helped set up all sorts of cash incentive programs for technicians. You want to make sure that the profit you are receiving from the program makes sense for the compensation plan that you put together. There always needs to be a cap established to the percentage of revenue you are going to allot for compensation for any department. Obviously, there are many ways to set up these programs, but as I stated earlier, I would work with the employees in the department to help establish the program, so they know what you are expecting and what the rewards will be.

Another area I think that cash incentive programs work well is an outside salesperson that goes out and looks for new business. Again, you are rewarding the effort of bringing you new customers that may have never walked through your door without this person going out and looking for them. You can reward this person with a bonus on the business that these new customers bring into your business every month and that could include equipment and parts sold to this customer.

With regard to sales in general, I like to reward salespeople if they exceed goals. I especially like rewarding for increases in gross margin. I don’t mind rewarding sales that are beyond what an average price increase was for this year plus a true sales increase. I would suggest linking both gross margin and increase in sales for compensation because sales increases don’t mean much if there is less profit. Jerry Clay from Clay’s Power Equipment in Raleigh, N.C., concurs. “I usually look at their personal sales from last year, and increase it by a percentage that we need to show the profit that I have set as a goal,” Clay said. “If the employee was not with us last year, I look at comparable employees and what they achieved in sales. I try to make the goals fair, based on their product knowledge and history.”

I also like to track these types of goals on white boards to show employees where they are at any given time. The more you can keep the goals in front of them, the more they will remember to factor it into their job function.

2. Perks: These can be a great way to incentivize your employees. Perks can be as varied as the number of people in your workplace. Not everyone will respond to an incentive the same way, so you can tailor your incentive to each employee. Some employees would love an extra-long lunch break. Some would prefer extra time off. A lunch day provided by the dealership regularly might be appreciated. Depending on the makeup of your dealership, extracurricular activities, such as a party or after-work activities like bowling or going to the movies, can be a great way to not only get the most out of your employees, but also to build a more cohesive staff. These perks can be a reward for extra effort that really cannot be tracked monetarily. I tend to favor giving them a certificate for time off to make it a more tangible incentive.

3. Personal reinforcement: I am not sure that owners understand the power of the words that they speak or write; they have a tremendous effect either positively or negatively. A well-timed compliment can be worth more than any financial incentive that you can provide to someone. President George H.W. Bush was famous for his handwritten notes to those who he wanted to express his gratitude toward. If it is good enough for him, it should be good enough for us too. A nice handwritten note or a card with your expression of thanks for a job well done may speak more to an employee than cash compensation ever could. Whether it is written or spoken, please look for opportunities to catch people doing something right and praise them for it. You can also include a gift card in the note to reinforce the event even more.

Sometimes, I wish I had the opportunity to write more on certain subjects, with this being one of them. You can never go wrong when you “incentivize” your employees. You need to make them aware that you want to share the profits with them when the business produces profits, and you really want the dealership to be an awesome place for everyone to work. I like what speaker and author Jim Stovall said: “You need to be aware of what others are doing, applaud their efforts, acknowledge their successes, and encourage them in their pursuits. When we all help one another, everybody wins.” The truth is you want everyone to win in your business: your customers, your employees and yourself. Incentivizing others can be a big key to that success.

1504_OPE_FS_Profit Center Series-Part III-Service2_author-Jeff Sheets-web

Jeff Sheets is the founder and owner of OPE Consulting Services. Whether a business is thriving or struggling to survive, Sheets’ rich experience in both the corporate and not-for-profit sectors allows him to partner with business owners to customize unique strategies for their needs. For the past nine years, he has worked extensively with hundreds of outdoor power equipment dealers to create best practices in business structure, personnel management and financial profitability. For more information, he may be contacted at opeconsultingservices@gmail.com or (816) 260-5430. You can also follow him on Twitter @opeconsult, connect with him on LinkedIn, and visit his website at www.opeconsultingservices.com.

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