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Staff incentives provide a tool to increase motivation, shape the way people work and make businesses more productive. But how are they best aligned with hitting targets and KPIs?

Our productivity partner, Be the Business, spoke to two successful entrepreneurs about the way they develop staff incentives, including linking them to company KPIs, the importance of reporting and the value of surprising people.

Linking staff incentives to KPIs

Aligning perks with KPIs helps provide a consistent message about how staff should behave and makes it easier for the leadership team to communicate goals.

Online business WhoCanFixMyCar.com connects garages with consumers. Its 35-person team needs to ensure there’s sufficient liquidity for the service to be useful to both groups.

“Are customers receiving a good number of quotes in a good timescale when they post? If a garage logs in, are they receiving a sufficient level of work? If we get that right the more commercially focused KPIs will flow from there,” explained CFO Fred Parkes.

Key metrics include customer acquisition costs and lifetime value. WhoCanFixMyCar’s staff incentives are wrapped around these KPIs. For example, salespeople might be part of a commission scheme based on sign-up and renewal numbers.

Team-based incentives encourage the promotion behaviour that doesn’t have a direct commercial impact, but helps the business run effectively. The company is growing rapidly and expects to make 15 new hires by the end of the year.

“There’s a series of ten KPIs, over a quarterly basis, to create that incentive pool. Those that are more important to the business are assigned a higher weighting. This includes things like doing the weekly reporting on time,” Parkes added.

“That encourages people to use time in the right way. If all staff incentives are focused on commercial targets then staff time is focused on that, and other stuff doesn’t get done.”

The value of surprising people

While linking staff incentives directly to business targets and KPIs is incredibly effective, there’s room for creativity too.

Rob Law, founder and CEO of child’s travel accessory manufacturer Trunki, said the incentives people aren’t expecting are the ones that can have the biggest impact.

“When people aren’t expecting to get anything that seems to have a bigger impact than having a structured bonus,” said Law. “Obviously the sales team work slightly differently, but across the business that works really well.”

The most effective incentive Trunki has implemented is its summer hours policy, according to Law. It follows naturally from the company’s family-friendly policy of providing flexible hours and the ability to work from home.

“It’s optional but most people sign-up,” said Law. “They come in half an hour early each day and get Friday afternoon off. People really enjoy spending that extra time with friends or family. We’ve done that as long as I remember. It probably started when we got up to 12 employees.”

Trunki now has 80 staff members. It’s important new employees join the company because they believe in its mission, so the incentive isn’t normally mentioned during the hiring process.

Regular reporting crucial to hit targets

WhoCanFixMyCar has a strict reporting regime that includes sharing performance on a daily, weekly and monthly basis. Daily KPIs are shared in the morning to provide a focus for that day’s activity. Being an online marketplace means they’ve been able to largely automate the production of these reports, but staff are expected to understand, share and act on the information.

Employee behaviour has to change as a business grows. This means staff incentives need to evolve too.

“These things need refining fairly regularly,” said WhoCanFixMyCar’s Parkes. “The fact we’ve refined our sales commission structure is indicative of this. As the size of the business changes, the way we interact with our drivers and garages changes.”

Creating staff incentives is one of the key levers business leaders have to impact employee behaviour. Hitting targets means giving them the attention they need to promote positive behaviour across job roles, to boost communication and create camaraderie.

It’s useful to think about the KPIs you want to impact and the behaviours and actions that will make a difference. These can easily be combined. Surprising staff can have a big impact on morale.

Key takeaways

  • Linking incentives to key KPIs, not just commercial targets, helps ensure staff spread their efforts across all tasks that are important to keeping your business running smoothly.
  • Staff incentives don’t always have to be planned. Surprising employees with an unexpected bonus or perk can be an effective morale booster.
  • KPIs and staff incentives should be re-evaluated as businesses grow and change.

While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.

About the author

Be the Business

This article was produced by our productivity partner Be the Business. We’re working with Be the Business to help businesses across the UK improve their productivity and boost their performance.

Find out more about Be the Business.

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While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.