Payoff from Payout

Feb 01, 2001 10:30 PM  By

Pay employees well and they’ll work hard and be happy – true or false? In the numerous published rankings of ten conditions that have the most impact on employee satisfaction, money usually falls between fifth and tenth on the list.

Paradoxically, almost everyone wants more money almost all the time. Even millionaires are dissatisfied with their pay. In an article titled “Who Wants to Manage a Millionaire?” (Harvard Business Review, July/August 2000) Suzy Wetlaufer describes the difficulties of motivating and retaining millionaires as employees, difficulties that include their desire for ever more compensation.

Although pay may not be the absolute, most important factor in employee satisfaction and retention, everyone, whether boss or worker, agrees that compensation is a critical part of the work experience. And yet, too many businesses use compensation and compensation plans ineptly and create employee dissatisfaction as frequently as they create the desired opposite.

But businesses in general, and specifically call centers, try to use pay as an incentive to make something people don’t want to do more appealing. The additional effort doesn’t come about because workers develop more tolerance for something they don’t like to do.

When money is bad “Pay for performance” programs and other incentive plans can encourage undesirable behaviors such as rushing customers off the phone, pressuring customers to buy, giving away premiums or free trials and ignoring customer needs and preferences.

Conversely, the reps who aren’t motivated by the additional cash, or who feel they cannot meet the level of performance that will generate the payout, may lie back believing that the extra effort just isn’t worth it.

Making incentives work No pay or incentive plan can be effective unless employees understand two things: how the plan works and what’s in it for them if they make it work. Even more, they need to know exactly what they have to do to earn a payout. If new or untested skills are involved, then you must provide employees with adequate training and practice time before you evaluate their efforts for payouts. Otherwise, the majority will face a frustrating struggle that will deter instead of encourage their performance.

Whether you’re initiating or revising an incentive program, here are some important elements to consider:

* Simple formulas. If employees can’t calculate their own results, the plan is too complicated. Use familiar measurements. Dimes, quarters, and dollars are easier to calculate than units of 12 cents; so are 5% and 10 % rather than 3.5 %. Prepare tables to demonstrate how the plan will work. Illustrate at least three levels of performance and payout ( high, low, and average). Be sure the high level you show is definitely attainable, if only by a minority of the work group.

* Balance of base, incentives, and power. The payment of incentives shifts employee perceptions about the balance of power between the management and the managed. As the proportion of incentive pay increases in relation to base pay, employees begin to feel entitled to “do what works” and are less inclined to believe that management should be able to regulate their methods and processes with measurement or monitoring techniques.

When incentive pay approaches 20% of total compensation, workers are likely to view any management requirements as impositions that will have a potentially negative impact on the reps’ ability to plan and sustain their household spending.

* Assessments of performance accuracy and appropriateness. At a minimum, the existing operational metrics should be tied in to the compensation plan to ensure that all performance components get their due; if the incentive specifically rewards speed or volume, extra attention must be paid to evaluating the quality of interactions. Any qualitative monitoring should be calibrated frequently to guarantee consistency and fairness.

* Reliability. Ensure that the tracking system is accurate. Fix any errors promptly (this means within 24 hours of discovery) and publicize the corrections. Otherwise the program loses credibility.

* Timely payouts. Long-awaited money loses its power to motivate. Daily and even weekly payouts can be exciting. Monthly payouts are appropriate for a permanent staff (with an average length of stay greater than six months). If you include performance pay in the same check as regular pay, makes sure there’s a clear and separate entry. When take-home pay is lumped together irrespective of source, employees may forget they earned some of it through extra effort, and the incentive loses its power to motivate.

* Campaign-based incentives. If you design incentive programs to boost the results of discrete campaigns or time periods, be aware that the operation will be subject to a “jump up, slump down” pattern. Plan for this roller coaster of results, because there’s very little you can do to counteract it, other than providing extraordinary supervisory attention or developing a series of incentives to make sure one is always in force.

* Communicating the plan. Explain the plan orally as well as in writing. Schedule presentations during work time-outs so workers can pay attention, but make sure they don’t lose money by virtue of having participated in the discussion. Use plain language and easy-to-read “what if” charts and handouts based on the sample payout tables you’ve developed. Leave one table open for them to plug in the numbers they expect to achieve individually.

You’ll need both the resources and the time to provide prompt, sensible responses to reactions the day you present the plan, the day after, the first time workers get a formal report, and every time they get paid.

Be sure to specify when you’re piloting and when you’re rolling out a plan so that everyone is aware of the difference and the time line. Once you’ve promised money, it’s very difficult to change the plan without negative reaction.

Finally, a confession. As a consultant who has observed and assessed many plans, philosophically I prefer a significant pay for significant work arrangement. Extra rewards take the form of occasional bonuses or thank-you gifts when employees go above and beyond, and profit or gains are shared when the entire enterprise is successful.

Given your druthers or your business model, this understated approach may not suit you. Whatever your preference, if your operation uses incentives, taking employee needs for clarity and consistency into account will get you a greater payoff from your payout.