This is a tricky topic. Setting up the right incentive program is probably the single most driving factor between a fast growing company and a stagnant one. But remember, before you look at the incentive program, fix your process. Here’s how your order of priority should be. 

1. Hire the right people
2. Iterate multiple times and fix your SOP. (This will never be 100% done but get to 90%).
3. Streamline your incentives to get better results

Only when you’re done with steps #1 and #2, you get to #3. Now, assuming that you’re ready to streamline your incentive programs, let’s see how you can set up one. 

Before we begin, you need to understand that your incentive program is something you’ll never be done with. It will need tweaking throughout the lifecycle of your business. If you stopped innovating on incentives, it is highly likely that your business is not growing/evolving.

The Objective:

Your objective in setting up the incentive program can have 2 major factors. Nothing else. 

• Quality of work done
• Quantity of work done

Don’t set up incentives for anything else. 

Quality

This is focused on improving the customer experience and repeatability. 

Quantity

Increase utilization of the user’s time to do more work. This makes sense when you pay your users usually a fixed amount and you have an additional bonus for the quantity of tasks done. 

Key Principles

Some key principles for how to think about a good incentive program.

1. Have a fixed salary component
2. Have an unlimited or really high upside potential
3. Set expectations upfront
4. Change gradually and meaningfully
5. Setup the plan for exponential upside
6. Attainable targets
7. Don’t bet the house

Have a fixed salary component

While it might be tempting to create a full payout only based on incentives, it is often not the recommended method. Have a base component of pay which is directly paid out when they show up. This fixed component will help you create a safety net in the employee’s mind that they will at least get a minimum amount in case things go wrong in the week. 

The base component should be an amount the user should be able to get when they do the bare minimum work. Keep it less than the standard industry pay and meaningful enough to do the job.

Have an unlimited or really high upside potential

Do not cap your incentives. Or even if you do, have a really high upside for your best performer. Your highest performer should make eye popping returns. This is the best way to motivate your entire team to push for something that’s exceptional.

Set expectations upfront

You should know that you will be changing your incentive plans often. As you start seeing more and more people hitting better performance metrics, you should revisit your incentive plans to push further. Given this, it is very important to set expectations to your employees that things will be revisited from time to time. This will avoid unnecessary surprises and heart burns when incentives change. 

Change gradually and meaningfully

Even when you change your incentive plans, avoid drastic changes. There’s an art in changing and rolling out new incentives. This involves planning, communicating, aligning and supporting your employees through the change process. Make slow and meaningful changes that make directional sense to your business and employee welfare. You can showcase better support tools, customer segment, process improvement to showcase better productivity help.

Setup the plan for exponential upside

Incentives are always step jumps. For example, there might be a small bonus to do 10 tasks, a bigger bonus for 15 and a massive bonus for 20. This jump should be exponential so the person who can hit 15 tasks would not be able to resist hitting 20 for the massive upside. Setup the incentive structure in this exponential manner to drive better and better performance results.

Attainable targets

Setting the right targets is an art. It’s not just enough to plan for exponential upside but the upside should be just barely reachable. If the top most target is completely unattainable, it might put off people and no one would try. You would want to set targets that people would want to try and hit.

Don’t bet the house

Last but not least, do not bet the house. Incentives drive a lot of results and it is easy to get carried away. No matter the performance upside, always have an eye on the money you are burning. Setting the wrong target might hit your bottom line very hard. So, keep an eye out.

So, that’s how it is. Hopefully that helped.