The right incentive schemes are the driving force for motivating staff

What is the single most important thing for every business to get right if it is to be successful?

Everyone has their own view – the offer, the product, the business culture, leadership, and so on. In my view all of these things are much easier to get right if the people working on them have the right incentives. But this is easier said than done.

Through a large amount of trial and error over the past 20 years, I have concluded that there are six common factors behind successful schemes:

  • Alignment: This is the one that private equity businesses get so right. They are shareholders so they make you shareholders. That way everyone is trying to achieve the same objective. If everyone is pulling in exactly the same direction a lot more gets done.
  • Focus: There was a fad for balanced scorecards in the 1990s. I don’t believe these work. It would be like assessing a football team not just on the goals they score but on how they look when they do so and the number of steps they take during a match. Human activity is maximised when it is focused on just one overriding objective.
  • The right objective: As the banking crisis showed, you need to motivate people on what is best for the owners of business, and this will not always be short-term profit.
  • Controls: Every incentive scheme I have ever devised or been given has loopholes. And a great deal of energy will go into exploiting those loopholes. Which means that the controls and measurement of those schemes is as important as the original design.
  • Relevance: There was a piece of research many years ago using teams in tugs of war. The more people who were put into a team, the less each individual pulled. Incentive schemes based on total company profit do not establish a direct connection between the efforts of the individual and the goal they are working towards. 
  • Motivation: It is human nature to assume that other people are motivated by the same things we are. Most incentive schemes are based on money because the people devising them like money. I got this wrong when I ran a pub business. Bar staff are not massively motivated by money – there are more lucrative jobs than bar work – so cash-based incentives had a limited effect. Then we realised that what motivated many of these guys was fun. That’s why they worked in pubs and bars. So we developed an incentive based on giving them the pub for the night and letting them have one huge party for themselves and their mates.  

What works for individual businesses also works for whole economies. The recent Budget was profoundly disappointing in that,
once again, politicians demonstrated that they don’t understand how to motivate the people they will depend upon to drive the recovery of this economy. This will probably not change until we have more politicians who have spent time working in business themselves.

Neil Gillis is chief executive of Blacks Leisure

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