1. Incentives & Motivation 101
(understanding the successful rules of engagement)
(understanding the successful rules of engagement)
Chet Trybus,
Executive Sales Dynamics, LLC
(616) 822-2928 1
2009-2010
2. Table of Contents
Page(s)
Business Objectives 4
Purpose of an Incentive Program 5
Incentive Rules to Consider 6
Basic Motivation Program 7
Fixed Award Program 8
Challenge Level Concept 9-10
Certificate Program 11-12
Performance Level Program 13-14
Challenge Mate Program 15-16
Team Awards Program 17-18
Recognition Awards Program 19
Glossary of Definitions 20
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3. Business Objectives
• Create a vision or end-point of what you
want to achieve as a result of your
program
• Involve as many participants as practical
• Design a program that is easily
implemented
• Insure ongoing communications of the
success of this program
• Have FUN
3
5. Incentive Rules to Consider
1. Keep the rules simple, easy to understand
2. Participants must know what they have to
do in order to perform
3. Rules should be meaningful, relating to
your objectives, the participant’s
opportunities and the earning opportunity
must be significant
4. The rules, as presented, must be perceived
by the participants as fair and the
objectives must be attainable
5
6. *BASIC MOTIVATION PROGRAM
This is the most often used rules structure AND it is the most effective. Base
programs should include the following concept whenever possible.
TIMING
Any time period. Normally six to 12 months . . . or on a continuing basis.
RULES
Each participant is given a measurable individual objective which relates to
the client's objectives.
A base program percentage of each dollar or unit value (sold/purchased) is
established and participant earns this amount from DOLLAR OR UNIT
ONE.
When participant reaches objective (which can be monthly, quarterly,.
annual), he/she earns BONUS award of X percent (a much higher
percentage than for the base award).
BENEFITS
True motivation program ... do this, get that.
Measurable objectives give client important data for analysis.
Measurable objectives also offer analysis of program's effectiveness.
Base payoff allows for frequent reinforcement.
Largest share of budget is given for incremental performance.
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7. *FIXED AWARD PROGRAM
This program is the basic application of having one specific award (trip, Award
Credits or special merchandise item) . . for desired performance.
TIMING
Short program, one to three months, or three to six months.
RULES
Establish one level of desired accomplishment (i.e., sell $100,000 to key
accounts).
When participant performs, he earns a set award (i.e., trip to Poland, or color TV
or 100,000 Award Credits).
Program is normally closed end, however a set payoff of X Award --Credits can be
set up for levels of performance (i.e., each $10,000 in - business earns 40,000
Award Credits).
Then participant can continue earning as he keeps performing . . .he., each
$10,000 earns (open end budget).
BENEFITS
Allows client to work within fixed budget.
Affords client breakage ... any performance over or under award level is not paid.
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8. CHALLENGE LEVEL CONCEPT
The Challenge Level concept is excellent where you have a discretionary
behavior situation such as independent insurance agents who can place
their premium business with any company.
TIMING
Six to 12 months because of the complex nature of selecting challenge and
administering the program. Be careful of continuing this type program too
long as your participants will reach a saturation level of the amount of
business they can give your client.
RULES
Establish volume levels of performance (10,000 - 15,000- 20,000) in units
or dollars.
Participant chooses which level they feel they can earn .. the higher the
level the higher the payoff.
When participant reaches their selected level, they earn the award for
that level (trip or Award Credits).
If participant does not reach selected challenge, they drop back one level
from actual performance: Example: If participant selected 20,000 as his
challenge and - actually did 17,000, he/she would earn the award for the
10,000 level.
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9. CHALLENGE LEVEL CONCEPT
BENEFITS
Program allows participants to select own goal.
Motivates participants to stretch giving the client business which
they might not have without the program.
Good for giving client breakage (non-redeemed Award Credits).
Good for use with travel and travel buy-in.
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10. CERTIFICATE PROGRAM
Certificate programs have been successfully used over the years by companies
who have large numbers of participants in their distribution system.
Usually best used where there are multiple levels of distribution
(Manufacturer - Distributor - Jobber - Dealer). Good for clients who work
with their distribution on co-op programs (sharing the cost) for promoting
product. Also excellent for companies (or divisions in the same company)
who have the same distribution (NAPA) National Automotive Parts
Association many manufacturers offering products under the some label).
TIMING
Continuing program. Has been used successfully as a bonus program ... or
spiff activity ... but normal usage is long term.
RULES
Certificates are produced with a pre-established Award Credit value (i.e.,
50).
Value of the desired activity is determined and measured in Award Credits
. . number of certificates earned (tire sale earns $2.50, five certificates).
When participant performs desired behavior . . he earns certificates.
Normally, certificates are issued as follows: Manufacturer sends
certificates to Distributor and bills for half the cost... based on issuance.
Usually based on Distributor purchases.
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11. CERTIFICATE PROGRAM
CERTIFICATE PROGRAM (continued)
Distributor sends certificates to Jobber and bills for a portion of
the cost . . again based on Jobber purchases.
Jobber awards certificates to Dealers based on purchases at a pre-
established rate.
BENEFITS
Good where there are a large number of participants difficult for
Manufacturer to reach.
Requires limited administration by the Manufacturer.
Good for multilevel distribution . . . sharing the cost.
Good for low budget programs (Manufacturer can generate dollars in
program by sharing).
Good where flexibility in making awards is required . spiffs, seasonal
selling situations . . . discretionary selling power at consumer level.
Generates a positive cash flow for the manufacturer . good in times
of high interest rates. Can invest money collected from Distributors
on issuance .. but Manufacturer doesn't pay until certificates are
redeemed. Most certificate programs don't begin generating
significant redemptions until the second or third year of the
program.
Company must make long term commitment . . .
Excellent breakage . . most certificates redeem somewhere in the
75-80% range after three to five years.
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12. *Performance Level Program
This type of program is also known as a Pyramid or Performance League
Program. It is excellent where you want to place emphasis on your high
volume participants ... and also want to offer an award earning opportunity
to your smaller volume participants.
TIMING
Three to six months, six to 12 months. Is more effective for a longer period since
competition is involved.
RULES
Levels of performance are established, based on the numbers of participants
Number of winners per level is predetermined . . . normally the same number for all
levels (top level can be all win).
Based on the participant's previous performance . .. they will compete for the awards
in a specific level. Normally established on a past year performance PLUS a
percentage increase for growth and inflation.
The higher a participant volume level . . . the greater the odds of winning in the
competition (percent of winners not announced).
Example:
Top Level 20 of 20 (All participants win)
Second Level 20 of 100 participants win
Third Level 20 of 200 participants win
Fourth Level 20 of 750 participants win
Fifth Level 20 of 1,250 participants win
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13. *Performance Level Program
BENEFITS
Excellent for fixed budget especially travel
programs where planned numbers of participants
are important.
Good where you want to be certain large volume
participants are rewarded.
Can be used to allow participants choice of level
where they want to compete (selected level
cannot be lower than objective volume).
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14. Challenge Mate Program
The Challenge Mate concept is good where you have high level participants
(Distributors) who are difficult to motivate with standard awards . . . and
who are familiar with one another.
TIMING
One to three months, three to six months. Shouldn't run much longer as
participants lose interest.
RULES
Participants are paired up based on volume.
Participants compete with their Challenge Mate . . . winner takes all.
Standings are reported on a regular basis and communication between
participants is encouraged.
At end of program, the participant who has won earns the award (one-half
earn awards).
BENEFITS
Good communications program .. adds excitement when run in conjunction
with base program.
Good for high level participants . . not motivated in the normal way.
Excellent where peer group recognition is important.
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15. Challenge Mate Program
BENEFITS
Excellent for fixed budget especially travel
programs where planned numbers of participants
are important.
Good where you want to be certain large volume
participants are rewarded.
Can be used to allow participants choice of level
where they want to compete (selected level
cannot be lower than objective volume).
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16. *Team Awards Program
Team Award program is great where you have a group of participants who
cannot be measured on individual performance but who can perform as a
team. This is especially good for employees with difficult or non-
measurable activities such us people who work in Service Departments.
TIMING
One to three months, three to six months. Can be run longer ... but it is
difficult to sustain interest for more than six months.
RULES
Fixed Award value will be established for desired performance. (This can
be open end if the attainment has the potential to escalate).
When team accomplishes objective, each member of the team earns award.
Awards can be established on individual influence (i.e., the Service Manager
might get $100 and the remaining members of the team get $50).
Award pool can be established and team members may share equally or
awards can be based on individual qualifications (participants earn
percentage of the pool). For example, the Service Manager can earn 30%
of the award and each other member of the team earns 15%.
Teams can also be used in competitions. Example would be Sales Regions ...
where the top performing Region earns an award for each of that Region's
team members.
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17. *Team Awards Program
BENEFITS
Good fixed budget award.
Excellent where individual performance is
difficult to measure.
Good where peer pressure can be
effective.
Can also be used to help reduce turnover
by making longevity a requirement for the
award.
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18. *Recognition Awards Program
Recognition awards are an excellent tool for motivating participants (even
though they don't fit under the standard definition) . . for a small fixed
budget.
TIMING
Year, six months . . length of program.
RULES
Performance being measured for recognition is established i.e., highest
percent against objective, highest $/units over objective, number of new
accounts, etc.
A fixed award such as a statue, plaque or other special-recognition item is
selected . . . and communicated to the participants.
Normally based on top performance.. . much better if it is strictly
measurable (rather than subjective on the part of management).
Can be just a top award . or two or more levels of awards.
BENEFITS
Good motivator for low fixed budget.
Lasting symbol of accomplishment . . can be talked about.
Recognizes top performance . . key to success.
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19. Glossary of Definitions
OPEN END BUDGET
• Participants continue earning awards as long as they perform the desired
behavior.
CLOSED END BUDGET
• Fixed budget available and awards are designed to remain within that budget
figure no matter how great the participants' achievement.
CONTEST
• Limited number of contestants have a chance to win an award . based on
Top Performers winning. (The key word here is win).
SWEEPSTAKES
• Limited number of awards are offered. Drawings are held and participants
win only when name is drawn. (The key element here is chance).
MOTIVATION PROGRAM
• All participants have opportunities to earn awards based on performance.
(The key element here is all earn best programs are based on individual
performance).
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20. Glossary of Definitions (cont)
GAME
• Participants have the opportunity to win awards based on their
participation in a game, related to program performance. (Key here
is a win game is normally a communications tool, rather than
motivation).
• Additional award opportunities offered during program.
FAST START ACTIVITY
• Activity designed to get participants involved and/or participating
as early as possible in a program.
FAST FINISH ACTIVITY
• Activity designed to step up performance in last part of program.
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