Questions HR will need to address in an employee incentive plan

by on June 17, 2009 · 0 Comment POSTED IN: HR Info Center

The 6 key HR questions in an employee incentive plan

So, you really have to say, “Do we have the right hunters versus farmers in the right jobs”. And, based on what kind of people, what job we’re talking about and what kind of people on those jobs will determine how much is target total cash and what the mix of between based salary and incentive will be in your employee incentive plan.

  • What does the market pay for target total cash?
  • Target total cash is what you’re after. You want the total cash payment, if all goes to achieve exactly to be competitive.

  • Can an employee incentive plan have a slightly different mix between salaries versus incentives?
  • This is an internal decision. But eventually you work the total target cash to equal the market with objectives are achieved, exactly. And, that speaks to the mix of salary and incentive or commissions.

  • What kind of people do you really want in these jobs?
  • Assuming, you have identified exactly what the job is, what kind of people? Because how – what you pay and how you pay will determine whether or not you get the right people there.

    In fact, in sales there’s a tendency to put all the jobs and all the people on a continuum. On one end of the continuum, you have what’s called farmers. On the other end, there are hunters.

    Farmers, generally, are people who deal with existing clients. They may be responsible for not only implementing, but they also – but all the day-to-day administration and they may even responsible for generally additional business from new clients.

    These people are paid differently than the group that is on the end of the spectrum and now, those are the hunters. These are the people, who go after primarily new business. They’re the ones who make cold calls, they meet people for the very first time and have a certain amount of time to get their spiel in order to sale their product and service.

    It takes a different type of individual to do this type of job. Most Human Resources people don’t fit this personality profile, but we do need them in companies.

    They may not necessarily, they are very money motivated and they may not really care that much about how well the company does as long as they can reap the benefits of the employee incentive plan.

    Sounds disloyal, sounds selfish, but may be that in certain cases you need these types of individuals. They’re the hunters and they are paid differently.

  • What is the sales cycle?
  • Some sales are very quick. You go meet a potential cold client or customer. You give your pitch. They say, “I’ll buy it”. They sign on the dotted line. You walk out with the sale. Very quick.

    In other cases, it’s a very much a relationship. Meaning that you need to meet with the potential customer or client a number of times to build a relationship and talk about very complicated solutions to business problems that they may have. And, this may involve relationships that may stretch for months if not over years. So, you have a very long sales cycle before a sale is finally completed.

  • How much selling is really required to make the employee incentive plan work?
  • In an employee incentive plan, you really want to base the reward off of effort. In certain cases going to a customer or client, could be existing customer or client, may be as easy as, essentially, taking orders.

    In some cases, though, you really have to understand not only what the problem is that the client or customer is having, but how your service or your product and help them resolve that. And some of this is can be very technical. So, how much selling is really required. The more selling the more you want to put at risk in the employee incentive plan.

  • Does it matter a business comes from an existing customers or new customers?
  • In some cases, you may have a sales person who actually is doing both. They are selling and this is, generally, for smaller company. Eventually the larger companies start realizing that they need to separate out the hunters versus farmers. But, smaller companies may not have that luxury. So, you have to be a little bit careful of what you put in the employee incentive plan. What you put in there is what you’re going to get.

    Edited Remarks from “Incentive Talk: How to Design an Incentive Plan that Works for – Not Against – Your Company’s Goal” by Rick Olivieri

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