Check out the following article from our partners at BlueIQ for an interesting perspective!
Original article by | May 18by | May 18, 2016 | Performance IQ, 2016 | Performance IQ
Some of us don’t know how to share very well. But if we’re unwilling to share the wealth with our team (which their blood, sweat, and tears helped produce), they’ll lose their enthusiasm and drive. So, we can’t view it as an increase in overhead; it’s an investment. A reward system is premium fuel for our production machine. Hence, why it’s time to say goodbye to irrelevant bonuses (psst . . . like Christmas bonuses) and hello to a reward system tied to performance!
My specialty is practice management and development in dentistry, but the benefits of a reward system are in no way confined to dental entrepreneurs. In some aspects, a business is a business regardless of industry. A reward system is just one of those aspects. Thus, if you’re a business owner who wants to move the production needle, then you’re in the right place to learn how.
A Good Reward System Will Pay For Itself!
In order for a bonus system to be effective, it has to be tied to performance, not the calendar. Moreover, it needs to be supported by a culture that sparks intrinsic motivation, because extrinsic motivation only goes so far.
So, say goodbye to Christmas bonuses!
We can’t bonus our employees because the calendar said it’s time and think that’s going to drive performance. The bonus is attributed to time, not production. Instead, we need our team to understand that the more they produce, the more valuable they are to the company. Whether or not we reward a team member should be directly connected to performance. When goals are achieved or benchmarks hit within given timeframes, that’s when we reward our team. The key is to set goals above current operational costs.
Here’s an example:
One of your team members upsells five products a day on average. You wouldn’t reward them for that; (“Here’s your bonus for doing your job.”) No, you’d work with the employee to set a goal above current production and reward the employee when that goal is met or exceeded. For instance, the goal could be set to upsell 45 products a week (that’s an increased average of 9 products a day). When the goal is met, the employee is rewarded. In this case, 1) the reward is directly linked to performance, and 2) you’re giving them a small percentage of the increased profit, allowing the system to pay for itself. (“Here’s your bonus for driving production!”).
Not to worry, you’re not a Scrooge for removing traditional Christmas bonuses from the menu. You’re simply showing your appreciation throughout the entire year, instead. Nevertheless, before your team leads a mutiny, inform them that they can still earn a bonus in December. It just won’t be for Christmas, it’ll be for driving production!
Extra Effort = Extra Pay or Rewards
Keep in mind that incentive programs don’t take the place of merit raises. Incentives are extra pay or rewards for giving extra effort. Merit raises are pay increases provided after an employee performance review has been conducted discussing the employee’s work performance during a certain time period.
What and Who Should You Bonus?
If some of the team is rewarded, while others are not, it’ll be counter-productive with division of team cohesiveness. Alternatively, each member of your team (excluding the executive team) should be rewarded for their performance. Managers are rewarded for meeting or exceeding KPI objectives. On the other hand, team members are rewarded for the performance of their important, upstream metrics. When we drive the performance of upstream metrics, we drive our company’s vitals—the KPIs keeping our baby kicking.
The Power of Intrinsic Motivation
A proven fact: happy employees are more productive.
Reward systems help our employees feel happy and valued through acknowledgment and appreciation. However, not all incentive programs are effective. Some create unhealthy competition among staff members, some create jealousy, others fail to drive performance. The problem with those systems is that they aren’t designed to inspire your team and drive production intrinsically.
When your culture supports your reward system, you end up with a team excited to move the production needle and intrinsically-driven to progress the company vision. They understand that it’s a team effort to achieve the common goal. Meeting or exceeding expectations actually brings a feeling of happiness, because that means they’re fulfilling their piece of the vision. Building a data-driven culture to support your reward system is essential to fostering intrinsic motivation.
A Good Reward System Pays for Itself!
My reward system below might seem like a big bonus to provide each team member. Though, let me assure you, the bonus to my business was always bigger! With my reward system, the target was graduated and so was the bonus. At first, I only rewarded the average dollars-per-day produced and collected, but eventually, I began providing smaller individual rewards for upstream metrics that affected KPIs like % Collected and Total Production:
Goal $4,500 Bonus $200
Goal $5,500 Bonus $300
Goal $6,500 Bonus $500
Goal $7,500 Bonus $1,000
Improvement Requires Measurement
Since, my dental practice was extremely productive, I thought my Late-Cancel No-Shows percentage (LC/NS %) must be pretty good. Yet, when I started measuring it for my reward system, I found that wasn’t the case at all. My LC/NS% was 11%!!!!! I was stunned! Now, I’m a firm believer that “what is measured, grows.” Monitoring something breeds action and accountability. Once I started measuring my LC/NS% and rewarding performance, I was able to decrease my percentage by 2% a year.
Premium Fuel For Your Production Machine
Overtime, through my experience of owning a business and eventually, implementing a reward system, I found that a business is like a car. The employees are the engine and a good reward system is top-notch, premium fuel. Yeah, your business can run on regular unleaded (work ethic), but everything seems to perform better and function more efficiently if you take better care of the engine.
If you want to get the most out of your car, you’ve got to get the most out of your engine, right? It’s time to implement a reward system tied to performance and say goodbye to extraneous bonuses!
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