Small Business, Big Lessons® – Align Incentives So They Don’t Be Disincentives

One of the early lessons of owning a small business is the power of motivation. We developed a motivational plan for our leaders and tried to keep it “simple” with 2-3 goals. All of this is very achievable and a “stretch” goal. The idea is to reinforce routine work (both quality and quantity) with simple goals and have a stretch goal for something we really want to accomplish because we know it will be more effort, but also exciting. My personal assumption is that everyone has the same work style as me and don’t leave any incentives on the table. It turns out that 3 out of 4 is enough for many leaders who don’t care about having extra money. Too much work! ! !

We’ll examine what went wrong, and how to create incentives and minimize disincentives. These incentives act as disincentives for owners as we spend our money on bonuses without seeing business results. We’ll look at the reasons behind good incentives, expected outcomes, and how to create motivating rewards. More details on these three fields:

1) why – The first step is not motivating work that is part of core job roles and expectations. Anything that is part of normal expectations is required for the job. By adding additional incentives, it creates an expectation of just doing the “day job” – now expecting extra pay. If quantities are reduced or eliminated at any point, it creates dissatisfaction and reduces productivity. If this is part of normal role expectations and they are already compensated for the work, no additional incentive is needed. If not, go to Target Results to define “beyond” expectations.

2) targeted results – In a commission role, it is easier to define. Account managers have quotas. If they do well, you can offer a multiplier of over 100%. Other roles may have more MBO, management by objectives, measurement types. They are designed to target key desired outcomes. What results do you need to drive your business forward? Is it more cross-selling activities, trained employees, employee retention? Are the metrics clear, are the results achievable with a certain amount of effort and beyond the normal scope of work, and if so, motivating? If not, think about “why”.

3) motivation – Are the incentives or rewards equal to the level of effort required to achieve the goal? Is the reward something motivating? Remember, rewards don’t have to be cash only. It could be a vacation, a paid long weekend trip, gift cards for people’s favorite extracurricular activities. In any case, it must make sense to the intended recipient, otherwise the desired internal momentum will not be generated.

think seriously

Are your incentives aligned with stretch assignments or just participation trophies? Are you creating perpetual entitlements with incentives that can be added or removed based on business needs to drive the results or occurrences you need? Incentives can never replace a person being paid fairly for the work they perform. They should not be used as rewards for performing “day jobs”. They need to focus on some extra work and be important to the business with motivating and achievable tasks. Be clear about how long the incentive will be in place, otherwise it becomes part of the expected compensation and is seen as a disincentive.

about the author:

Gregory Woloszczuk is an entrepreneur and experienced technology executive who helps small business owners increase revenue and profits. Gregory believes in straight talk and helping others see what they need to see, but may not want to focus on taking responsibility for his own business. He and his wife Maureen founded GMW Carolina in 2006. does not charge a subscription fee, where you can directly support our local journalism efforts. Want more of what you see in Chapelborough? Sign up for our bi-weekly newsletter and let us provide you with free local news and community information.

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