Motivating employees … the role of incentives

It is common knowledge that the owner-operator effect results in a significant uplift in performance. However, an attempt to produce a similar uplift with employees can prove difficult, and a drain on the bank balance.

 Owner-operators are driven, in some part, by the prize at the end of the rope for running a lean, mean and profitable business. Any extra effort they invest now is likely to result in a return in the future. Such owner-operators are prepared, for example, to open shop thirty minutes earlier and continue serving customers till well after closing time and not hire outside help if they can do the job themselves - all to make their business increasingly profitable.

Seeking a similar uplift from an employee is likely to be a frustrating and unsuccessful endeavour unless appropriate incentives are offered as a source of motivation. Traditionally, the first and only method of motivating employees has been through a simple commission structure. Although this has been successful in the past, today’s business environment can often demand a more sophisticated model.

Many businesses are instituting employee incentive models that require up front cash from the employee to create “skin-in-the-game”. The salary component of the remuneration package is often variable, based on ongoing performance, whilst the end-of-term payout is linked to a pre-defined asset value. This structure is suitable for consistently high-performing employees who have the ability to reach the next level, but require more incentive to do so.

Innovative models such as these will have commercial, accounting and legal ramifications for your business, for which professional advice should be sought.

Ayush Trivedi

Ayush Trivedi  is a Consultant at DC Strategy.

DC Strategy is the region’s leading specialist consulting and legal firm. Our specialist teams in Strategy, Franchising, International and Legal have developed the networks and brands of many of the region’s most successful businesses. Contact Ayush Trivedi at ayush.trivedi@dcstrategy.com