A few weeks ago, Jackie Klein (an Analytics Consultant from Wells Fargo) sparked a great discussion when she posed a question to the Incentive Compensation LinkedIn Group:
How should I balance three incentive plan metrics to reduce costs and drive efficiency—without sacrificing productivity or quality?
The three metrics were:
- Efficiency
- Productivity
- Quality
Here’s a summary of responses from the experts:
Jackie’s done a good job of not complicating her plan by limiting herself to three simple metrics. See here for a guide to choosing the Right Sales Performance Metrics.
(Experts: Alex Murchie, Equinix; David Cichelli, Alexander Group)
Each metric should be weighted over 15% to make it substantial enough to attract her team’s attention.
(Expert: Mike Rose, Infotensity)
If Jackie finds that low quality becomes an issue, she could try linking the efficiency and quality metrics. However, the linked metrics shouldn’t exceed 70% of total compensation
(Expert: Howard Norton, Norton Godwin Ltd)
Some other great questions + thoughts:
Measurements:
- Is this an ongoing measurement, a quarterly report, or is there a “live” dashboard showing the three metrics?
- How quickly can a metric change thanks to employee action?
- How much is the metric due to single employee vs. group vs. company?
- Do you have a leaderboard ranking showing how certain teams / divisions / employees are doing against different measures?
Payments:
- How often are you paying? Is this for an annual bonus similar to a profit sharing measure, a quarterly bonus, or a monthly payment?
- How much pay is at risk? Is there enough of a bump in OTE after taxes to get the employees attention and drive performance based on pay?
The calculation / plan setup:
- If there is no variation in productivity, you could consider dropping it.
- Have a payout matrix for Efficiency and Quality where a percent payout is earned at the intersection of the two scores. The final percent could then be further adjusted by productivity if don’t want to drop that one.
(Expert: Erik Charles, Xactly Corporation)
What advice would you add?
