It’s measuring that matters

ROI key performance indictatorsIncentive programmes are now widely accepted by businesses that want to achieve sales and other goals; however, they are also often questioned about their impact. Proving that your employee incentive programme is delivering a Return on Investment (ROI) can be challenging for HR professionals and programme administrators. How do you, managers and the Board know that your employees wouldn’t have achieved those results without the incentive programme?

 

Proving ROI

Given today’s business environment with a focus on costs, it is necessary to be able to prove your ROI on your incentive programme and to ensure that it is providing you with a competitive advantage.

Unfortunately, the term ROI means different things to different people. Those involved in the financial area of the business will see ROI as a quantitative measure – a precise measure of the financial outcomes (returns) arising from investments in projects and initiatives that involve capital expenditures. However, business managers will often view ROI in a more general sense with a broader perspective and a qualitative focus, in other words, they will generally focus on the overall impact.

 

Getting it right

Too many organisations don’t establish measurable goals and what will be monitored and measured when planning their incentive programme. But it is crucial that you decide how you will measure your programme at the start.

Don’t give yourself extra work and there’s often no need to re-invent the wheel, so consider what information you already have available and how you could use it to see if your incentive programme is helping you achieve your targets.

The most important factor when trying to work out whether a scheme is succeeding is to ensure that the targets set at the start are measurable – what do you want to achieve? For example, has there been an increase in sales since the launch of the scheme?

 

Suggestions for metrics to monitor

There are a wide variety of parameters you could monitor as part of your incentive scheme. It’s important to choose metrics that help you monitor if your incentive programme is helping you to achieve your individual organisation’s objectives.

Here are some ideas of metrics you could measure:

  • Sales figure increases from levels when there wasn’t an incentive scheme
  • Specific products that are being sold
  • Profit margin levels on products
  • Participation levels
  • Incentive programme spending on rewards versus sales
  • Client referrals
  • Performance against sales quotas
  • Expenses against budget
  • Customer satisfaction scores
  • Profit per share

 

Other considerations to think about

ROI successWhile there will be specific metrics you will want to measure there are also other considerations to take into account. For example, if you are running a channel sales incentive programme with dealers then you may want to take into account the size of the dealership, whether it has sold your products previously and at what levels, and does the dealership stock competitors products or do they exclusively carry your products.

When it comes to sales people, then you may want to consider the size of their typical deal, how long the process for winning the business takes and how much effort to put the sales proposal together is required.

 

Whatever metrics are used to measure your incentive programme, it is imperative that it is regularly reviewed and that you use the insights you gain to improve your programme and make sure that your employees and ultimately your business reap the rewards.

 

Want to find out more?

Back to the How do you get maximum impact from your employee incentive programme? home page.

 

John Sylvester

John is responsible for the motivation division of p&mm ltd and a Director on the board of the IPM. Specialising in developing, implementing and directing many large scale staff motivation, recognition and employee communications programmes.
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