Commission vs Incentives – myths dispelled

Commission and incentives do the same job?

No they don’t. While both are performance related rewards, commission is simply a results-linked on-going element of the remuneration package. It disappears into the bank account for household spending with the rest of earnings. Incentives, however, provide a special boost to staff or dealer motivation. They inspire and reward extra performance within a particular period. They help to focus the minds of staff on investing greater effort during that time, and create opportunities for publicly recognising exceptional contributions. In fact, some companies who pay commission also run incentive schemes on top to inject extra momentum.

My staff prefer cash to vouchers or merchandise

While many employees may initially say when asked that cash would be their preferred incentive, the reality is that it simply gets swallowed up in the costs of everyday living and therefore loses its impact in terms of being an effective tool to incentivise or motivate.  Once the recipient starts to see the benefits that other incentive programmes offer in terms of the flexibility they gives them to redeem them on something special, or they have received an item of merchandise that they have aspired to own, then their perspective soon changes.

Incentive programmes are too complicated and costly to administer

They do not have to be. There are plenty of ways to run them without making them difficult. Some of the best programmes are uncomplicated and easy to administer, and this should be an aim of anyone designing a programme. The old adage “Less is more” applies here.

How will I know if I’ve got a return on my investment?

There are so many factors to consider, not just seeing an increased profit after deducting the cost of the scheme. The benefits may be long term and not just sales – brand awareness and reputation can also be improved short and long term. The return on investment depends on setting realistic objectives and then being able to measure them accurately.

The sales team are the people who matter. I don’t need to incentivise other staff.

It takes people working to the best of their ability at all levels to make a business succeed and that is why it is important to include all employees, from the top earners to the lower-paid, in motivation schemes.  Only rewarding high flying sales executives, for example, may cause other staff to feel undervalued, which will have a knock on effect on their performance.

Our budgets are stretched enough at the moment. We can’t afford incentives.

Effective incentive schemes don’t have to be expensive.  Rewards such as vouchers can be given in varying amounts to suit any budget and the reward values don’t need to be high to have impact.  Far more important is the frequency of rewards and how immediately they can be given to employees.  Vouchers are quick and easy to administer and can therefore be used to provide an instant reward for a job well done.   Additional perks which cost little but have a big impact can also be used, such as an extra day’s holiday or employee of the month parking space.

I don’t know what to offer our staff – cash is much easier to deal with

Selecting one item of merchandise to incentivise a diverse range of employees does require specialist skills and resources and for that reason many companies are choosing to incentivise staff with vouchers as they are as simple as cash to deal with, yet are far more memorable.  Employees should be encouraged to use them to treat themselves as, whilst using them to pay bills or for groceries is an option, it takes an element of the feel good factor away from the programme and the reward will soon be forgotten.

There’s no advantage to using vouchers any more – all the financial benefits have been eroded

There have been several research projects in recent years that have shown that vouchers are more effective than cash as incentives in boosting performance. Staff still like them and they can often spend them on a special reward to mark and remember their achievement – this rarely happens with cash.

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