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Are You Incentivising The Right Behaviour?

Team incentives | July 21, 2022
Adam Hooley

It is becoming increasingly popular that business owners want to reward their employees through a series of bonuses or incentives. While the concept seems pretty easy, there are complexities about why these incentives are paid and what type of behaviour they endorse in the business. I’m all for incentivising team members, but let's explore how a correctly structured incentive program will reward the employee and the business.

Business owners want to reward their employees through a series of bonuses or incentives.

An incentive program sends a message to the person receiving it and the team around them. Incentives must be specific and attached to rigid, defined and transparent criteria. For example, a team shouldn’t receive a bonus because you believe they worked hard this month. Others in the business have also worked hard this month but may have done so under the radar. These team members may see this as unfair.

Incentives must be specific and attached to rigid, defined and transparent criteria.

Normally incentives are strapped to key performance indicators (KPIs). You may have a set of internal and customer KPIs. For example, you may have task KPIs such as expired leases, vacant properties, or overdue work orders. You may have a customer KPI such as an NPS score. Set a reasonably high expectation of these KPIs. For example, if you are running a suite of 20 internal tasks KPIs then you set an incentive level of 18 out of 20. You also run a minimum NPS score of 45.

Normally incentives are strapped to key performance indicators (KPIs).

Incentive payments can be either a percentage of revenue or a fixed amount. I find a percentage of portfolio revenue is much better for budgeting and profitability. For example, a property manager's salary might be 28% of portfolio revenue, and the available incentive maybe 2% of portfolio revenue, meaning their total salary would be 30% of portfolio revenue. It also means the more properties they manage, the higher their potential bonus could be. You are not only incentivising a high level of performance but also incentivising the team member to manage more properties.

Incentive payments can be either a percentage of revenue or a fixed amount.

The incentive may look like this. If the team member achieves a minimum KPI of 18 out of 20 they will receive an incentive of 1% of portfolio revenue for the month. If they achieve an NPS score of 45 or higher they receive another 1% bonus. If they achieve both then they may also receive an additional 1% bonus meaning they would receive a 3% revenue bonus. On an average portfolio, this may be equivalent to $500-$600 per month.

On an average portfolio, this may be equivalent to $500-$600 per month.

Some pitfalls to incentive programs may include an automatic incentive, meaning the team member receives the incentive each month regardless of performance. This endorses a low-performance environment and fosters a culture of entitlement. Other pitfalls include having vague or easy criteria where everyone receives a bonus even though significant performance hasn’t been reached.

Some pitfalls to incentive programs may include an automatic incentive, meaning the team member receives the incentive each month regardless of performance.

By formalizing an open and transparent incentive program you are promoting and endorsing a high-performance culture. Team members have a result to aim for, and those that miss out on a bonus know why, removing any feeling of unfairness across the team.

By formalizing an open and transparent incentive program you are promoting and endorsing a high-performance culture.

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