When I joined Flight Centre, we all started on a commission-only salary.
Was this something of a baptism of fire? Yes. Did it create a thriving sales culture? Also yes.
I soon learned that every role in the company was linked to their results. This was crucial to the culture, and it worked.
We were motivated to work longer and deliver outstanding service with uncapped earnings. The more you sold, the more you earned — it was a simple equation. The philosophy was 90% of something is better than 100% of nothing.
Why incentive-based salaries retain your best Leaders
Have you ever heard one of your Leaders say: ‘I don’t feel rewarded for my effort’?
Have you ever lost a high performing Leader to another business for more money?
Incentive-based salaries have the greatest potential for driving performance and will help retain your best Leaders. When done well, it can be a crucial strategy for attraction and retention and can become a core part of your culture. It gives a sense of ownership of their performance, creates accountability, and genuine involvement in the business’s overall success.
How incentives-based salaries drive performance
Harvard Business School research into the impact of bonuses on sales productivity found that:
A 2017 study included observations of a 44% increase in productivity when the company implemented pay for performance.
When implementing incentive-based salaries, it’s important to design something that works for your business. It’s not a one size fits all approach. Tie it into your strategic objectives and your ability to attract and retain talent.
As Fotsch and Case stated in a Forbes article: “Companies with the most effective incentive plans involve employees in establishing team goals, thereby building both understanding and buy-in. They focus on goals directly related to the business’s financial performance. That way, if people hit the target, everybody wins: the employees are paid more, and the company’s finances improve.”
Seven tips to implementing successful incentives and reward systems
- Define precisely what outcomes need to be produced by each Leader. They need to be believable, understandable and measured by a KPI.
- Don’t have too many KPIs that need to be measured. Focus on the key results you want Leaders to achieve but always in the context of growth.
- Incentives should be paid monthly — quarterly and yearly incentives don’t work.
- The goals need to be a stretch but achievable.
- Don’t confuse incentives with recognition. They are different and achieve different outcomes.
- The goal should be incentives and recognition driving the same results and behaviours.
- Incentives should be uncapped. The better the results, the more you will earn and the better the company will be performing. Remember, 90% of something is better than 100% of nothing.
What do you think? I’d love to hear your experiences of implementing incentives.