The key essentials for a good incentive program

I once had the pleasure of working with someone who I would describe as one of the best people
managers I have come across. He was quietly spoken, never threatening and always let everyone
speak. He also had a knack of guiding the conversation towards a conclusion or action that the staff
member was going to do next.
 
The strength of this style meant that after the conversation the staff member was motivated to carry
out the action and see it to the desired outcome. They were interested because they believed the
action was their idea. If it did not work out there would be another conversation similarly guided to
an alternate action. He accepted that people make mistakes. Again, the staff member would be
motivated and carry out the tasks necessary to achieve the right result. When staff were successful,
they were very pleased and showed a sense of achievement.
 
This Manager wasn’t loud, wasn’t dominating in fact you would hardy know he was there. This was a
start-up business that become profitable in the first 3 months and is now in a growth trajectory. The
Manager knew the business, knew the customers, knew how to deliver and most importantly he
understood people. He was a master at execution.
 
A couple of months later a in a casual conversation staff member said hey "did you hear that we met
a significant milestone?". He was somewhat reluctant to reveal what the milestone was. On pressing
he revealed that the division had made a million dollars worth of product. This was literally amazing.
What was more amazing was that I didn’t know about this measure (I was the CFO). The staff were
fully aware of their financial goal and were tracking progress. They were clearly motivated by their
achievement and managing the process themselves.
 
When we are looking at staff incentive schemes, we often look to the financial rewards but it’s not
always the financial rewards that are the most effective. What is important is to embrace what
makes a person feel valued which is not all about money. Yes people have to live and we always like
more money, but what is truly motivational is to be appreciated for what you do and to feel a sense
of accomplishment for what you have achieved.
 
There is then a question of management style – how to get the best out of people, and how to get
the people to respect the Manager. In essence, staff need to be self-motivated, the role of the
Manager is to harness that and guide staff towards the right commercial outcomes. Peter Drucker
writes that we should seek opinions. Only through rigorous method and seeking feedback do we test
the opinions against a hypothesis. It’s this interaction that leads to effective decision making,
effective decision making does not flow from a consensus of the facts. In doing this we show that we
respect people’s views and value their opinions.
 
Jack Welch talks a lot about bonus schemes. When the Plastics Division of GE outperformed the
other more traditional divisions' he made a point of announcing that achievement at the annual
conference attended by over 500 executives. The Plastics executives no doubt were entitled to some
handsome bonuses, but equally or even more important was the recognition in front of all their
colleagues. The recognition cost must less than the bonusses.
 
We are all familiar with Maslow's hierarchy of needs. This says that basic needs need to be satisfied
before higher needs. Until a person feels they have a purpose which is a basic need, such as
recognition, financial rewards can be largely ineffective and costly. Frederick Herzberg is highly

regarded as a motivational theorist on Australian Management made the claim that money was not
a motivator. When the high level of remuneration for his speaking engagements came to light, he
responded "I never said money doesn't matter".
 
If we look back to the Manager who was the subject, he makes his staff feel valued and appreciated.
He is there to guide and help them when need. He is clear about what he expects but the goals are
team goals which all the staff accept. He has authority but he does not flaunt it. The key commercial
outcome is being delivered. That's why he is a good Manager.
 
As a financial leader I am often asked about incentive programs for staff at all levels. Usually Im
asked to do some calculations what it will costs and what targets we need to put in place. Im not
saying that isn’t important, However, perhaps what is far more important is some training for
managers on how to seek opinions, how to give feedback, how to show appreciation and how to
give recognition. Im sure you would find the return on investment for these factors would far exceed
the return on bonuses. In saying that, Herzberg's remark is very prevalent – money is not a
motivator, but you can never say money doesnt matter.
 
 
 
ABOUT BRIAN DOUGHTY
 
Brian Doughty is founder of the outsourced CFO which is a part time CFO service for small to
medium sized businesses. Brian's experience in large corporates and small business is unique and
has enabled him to develop a simple to understand set of tools which will help business owners
engage staff, monitor performance and achieve their goals. For more information, visit
www.theoutsourcedcfo.com.au.

References
1. The Essential Drukker, Peter F Drucker
2. Winning, Jack Welch with Suzi Welch
3. The Rise of Phycho Management in Australia, Robert Spillane