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A balanced approach to incentive compensation plans

By April 29, 2013January 16th, 2023No Comments

Motivating employees to meet or exceed sales goals requires an incentive compensation plan that takes into account not only monetary rewards, but motivational factors outside of financial incentives that have been proven to work. Forbes stresses the importance of researching incentive plans and analyzing the advantages and disadvantages of different methods before making any changes. Below are some things to take into consideration when selecting an incentive plan, as well as different methods which have been proven to work. Bonuses Lump-sum bonuses are a popular way to reward employees for a job well done, with 72 percent of firms utilizing this method to incentivize workers. These bonuses can be allotted on a monthly, quarterly, or annual basis once an employee has met a specific sales goal. By setting quotas and assigning long-term rewards for meeting them, employees are motivated to do their best work and reach higher to earn their monetary reward. There are drawbacks to this approach, however, which should be taken into consideration before this method is employed. Reaping rewards for hitting certain goals is certain to motivate employees to work hard and make more money for the company. However, once those goals have been met, there is a risk of employees losing that drive, which can negatively affect their productivity and sales numbers. Furthermore, rewarding bonuses based on a monthly or quarterly schedule can lead to order manipulation. If an employee has met his or her sales goal for the quarter and now qualifies for their bonus, they may be tempted to hold off on delivering any additional orders until the end of the time period so these orders will count toward the sales goal for the next quarter. Be flexible While bonuses and other straightforward monetary rewards may be the most common tactic to keeping employees motivated, it may be beneficial to consider other options. To promote a happy and more productive work environment, HR World recommends providing a flexible work schedule for employees. Allowing flexibility in daily arrival times, leaving the office for a doctor’s appointment or even for small personal errands can result in a more trusting and open work environment, and happier employees. Work from home Working from home is an incentive many employees appreciate. As an added compensation, employers can set up a program in which, once sales goals are met for the month, employees are then rewarded with the option to work from home a certain number of days per month. Telecommuting programs can make workers feel more appreciated and less stressed, and shows employees that management cares about their happiness. So long as productivity is not hampered, there’s no reason not to promote working from home as a form of incentive compensation. Management incentives Merit increases and bonuses can apply well to management as well as to sales teams, but it would be a mistake to treat compensation plans as interchangeable between departments. Since managers do not necessarily contribute to the state of the company’s finances through direct sales, it might be unfair to reward them as though they were. Stock options for management are a popular route to take, and they promote long-term success for the company. As with any plan, this must be  executed with care, as a boost in stock prices might benefit the manager without any actual improvement in their performance. Stock options can also stop providing motivation if investment prices drop, which effectively negates the benefits as the market fluctuates. To navigate these options and to help make the best choices possible, many HR professionals and sales managers have turned to incentive compensation software to assist them in their search for the perfect plan.

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Ballast Point Ventures

Ballast Point Ventures is a later-stage venture capital fund established to provide expansion capital for rapidly growing, privately owned companies in diverse industries, with a particular emphasis on companies located in Florida, the Southeast, and Texas. The BPV partners have more than 70 years of combined experience investing in and building high-growth companies in a number of industries, including healthcare, business services, communications, technology, financial services, and consumer goods. BPV has $200 million under management and seeks to make equity investments ranging from $3 million to $10 million.

Harbert Management Corporation

Harbert Management Corporation seeks to generate superior returns for their investors by identifying and investing in the most promising early growth stage companies in the Southeastern U.S. HMC seeks to capitalize on what it believes are compelling regional dynamics, such as a strong and fast-growing economy, significant research and development activities, and an established entrepreneurial community. The HMC team combines substantial investment, advisory, and operating experience with capital and networking contacts to support great entrepreneurial teams in successfully executing their growth plans. With offices in Birmingham, Alabama; Richmond, Virginia; and Gainesville, Florida, it’s well positioned to partner with entrepreneurs throughout the Southeast.

KBH Ventures

KBH Ventures was an early investor in Iconixx Software. KBH's investment philosophy plays a significant role in the firm's successful track record. KBH believes in running businesses to be cashflow positive and profitable every month. Startups and companies in a startup mode, such as one that has been purchased in distress, are expected to generate revenue within the first six months and reach profitability within the first 12 to 18 months. KBH also only invests in or acquires companies that are in the startup phase or have less than $20 million in revenues. KBH targets technology companies that offer business-to-business services.

S3 Ventures

S3 Ventures is an early expansion and growth stage venture firm with $200 million under management. It’s focused on information technology solutions that solve large business problems. S3 also invests in medical devices that improve the human condition. S3 invests in category-defining opportunities. It partners with the team and help focus methodically on what it takes to build a successful company. S3 today helps talented entrepreneurs take their technology and market knowledge and form valuable businesses in a repeatable fashion. Investment sizes start at several million or more for Series A, B, and C financing.