The Role of Management Incentives

• DavidCohenInterview806.mp3

DavidCohenInterview806.mp3

David Cohen, General Manager of Matchbox, speaks with DC Strategy about the business impact of their recently implemented remuneration incentive program.

DCS:    Welcome to the DC Strategy interview with David Cohen, General Manager of Matchbox.  So David, why did Matchbox make the decision to invest in the remuneration incentive program?

David:  Well Duncan, we went through the process of putting together a franchise model for our business, which also made us look at the performance aspects of our current business model; especially our corporate stores.  We knew that we had to come up with a motivation for Store Managers that was similar to the financial incentive to succeed that our franchisees were inevitably going to have. 

DCS:    And what were the benefits to Matchbox of actually going through the design process of this remuneration incentive program?

David:  There were probably three major benefits.  It enabled us to do a detailed evaluation of the critical KPIs (or key performance indicators) and their weighting as to the effect on our business.  At the start of the process we went through and did a store manager survey with our key staff to get some feedback on what they thought were the critical areas of head office communication that were good, or that were lacking.  We also did a critical assessment of what we wanted to achieve in terms of performance for the next 12 months in terms of more than just turn over and budgets.

DCS:    Right, and what were the outcomes of the process; if possible, a qualitative and a quantitative comment on that?

David:  OK.  I suppose from a qualitative point of view it enabled our store managers to focus more on bottom line performance and the drivers behind this, which they probably hadn’t had before.  It gave them an ownership of the business and made them realise what the outcomes of their management would be.  It also gave us areas of focus for the Area Manager, whom the Store Managers reported to, and to enable that person to work through with the Store Managers in key areas that we wanted them to focus on. It also forced us into a more regular and focused reporting process. 

From a quantitative perspective we got to the point where any award achieved by our staff, financially, could be obviously related to the quarterly or annual achievement of their stores and our business.  We got a gradual improvement in bottom line store performance over the course of a few months after starting the program.  And also, regardless of the level of turnover we achieved, our expense lines in terms of wages, expenses, etc had markedly decreased and there was definitely a focus that they (the Store Managers and Area Manager) didn’t have before.  And probably in the last 6 months just gone, we have achieved both top and bottom line improvement in performance.

DCS:    Great, and how long was it before the benefits were observed in the organisation and how were they expressed?

David:  Some stores observed benefits quicker than others.  This was very much dependent on the level of understanding and motivation of the particular Store Manager.  The first thing I noticed was the actual demand and questioning for information from the managers, which I didn’t have before.  It realistically has taken probably more than 12 months to see a real change in both the mindset and performance of our managers and the stores. 

DCS:    And now they are very much keeping you on your toes I guess?

David:  Yes, definitely, definitely.

DCS:    What would your recommendation be to any company considering such an approach to performance improvement?

David:  Probably the first thing we did, and that I would suggest to do, was to decide who had the most impact on performance and create a program that really aligns the rewards with the performance output.  Again, implementation of the project is a real key.  The more time spent in this area, including constant training, is extremely important.  Staff really have to be given the tools to achieve the KPIs that we set them; not just be told that: here is your performance program, there are the KPIs you need to meet; but we actually then had to go back and teach them different ways of selling and teaching staff, and all that sort of stuff, in order to be able to help them achieve those KPIs. So the feedback and implementation training aspect of it was a really key thing to worry about.

DCS:    So David, in hindsight what would Matchbox have done differently?

David:  Well I suppose, just going back to my last point, we probably would have spent more time in the actual implementation stage of the projects and building up managers’ knowledge and training of the system and this possibly could involve DCS being more involved with us for a period of time after the initial launch of the system. We probably just took it and ran with it and that’s why it might have taken a little bit longer than it possibly should have, to get the full results. Now it’s working really well, but if maybe we spent a bit more time on the front-end implementation it could have been a little bit quicker.

DCS:    David, in conclusion before we wrap the interview up; are there any other thoughts you would like to share?

David:  Probably just to say that because both our Store Managers and Area Manager know that every aspect of the business now has an effect on their overall award so from little things like the amount of telephone calls that are made to, discounting products, to wages and staff rostering and all those sorts of things; now have the effect that they are really thinking about the total management of the business. This is a really positive step forward for us.

DCS:    David Cohen from Matchbox.  Thank you very much for your time.

David:  Thanks Duncan.