Bob, not his real name, was talking about one of his early post college jobs.
Just after graduation, he sold financial products over the phone. He was required to make 30 outbound cold calls each day.
So, he recounted, he’d get in first thing in the morning, make his 30 calls and then leave.
Success was measured in the number of calls – that was what his employer was paying him to do – not in the dollars of actual sales.
What are you incentivizing your employees or independent contractors to do? And what if those incentives are driving them to not do other things that are far more essential for your business? Or, even worse, what if those incentives are driving them to do things that are clearly detrimental to your business?
Consider these examples:
An anesthesia group pays its physicians for quick “turnaround times,” the lag between sequential cases in an operating room. But patients complain to the hospital that the anesthesiologists are rushed, rude, and not interested in their concerns.
A fast food restaurant uses a timer to measure the time the drive-through window employee takes on each customer interaction, seeking to reduce it to the absolute minimum in order to speed the pace of the line. The “winning” employee of the week is paid a significant, when measured against hourly pay, bonus. But customers complain that they are not getting the correct order, that items are left out, and that the employees are rude.
A medical group pays each of its four physician owners an equal salary package to reward their supposedly equal contributions to the group’s success. One, or perhaps more, of the owners quickly figure out that the “game” is now to figure out how to work less for the same pay.
Compensation plans are far more than a part of the toolset for attracting and retaining partners and employees. Everyone knows that they incentivize performance. But too few take the time and effort to consider what their plan will also incentivize or de-incentivize.
Speeding the flow of customers through the fast food line or from pre-op to the O.R. and then to the recovery room may well be a good thing from one or even many perspectives. But if the cost of doing it is destroying your customer base, then it’s a very shortsighted gain.
Devising the right compensation plan is a complex undertaking. It involves far more than just “pay.”
So, ask yourself, what are you actually incentivizing?
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss