Tonight brings us another guest post from Steve Day. The former Vice President of Tractor and Equipment, Steve is discussing incentives, and how they can drive your growth in your business.
Incentives Can Drive Growth
For the majority of my career, I believed that a paycheck was a pretty good incentive for doing your job. When I worked for a manufacturer, I often got suggestions from my employees that we should offer incentives directly to our distributor employees to direct their activities more in the direction we wanted them heading. I always considered this a gross intrusion into the distributors business. As time went on, I did grow to like the idea of manufacturer incentives to distributor employees (paid through the distributor) to drive distributor employee training in areas of products and systems. Cash, trips, awards, peer recognition, all seemed to have a positive impact on employee capabilities.
When I made the move to distribution, I fell back on my old beliefs that a paycheck was appropriate compensation. I was convinced to try some experiments in incentives by some of my managers and we made some tentative tiny steps in some products. I have always been a big believer in unintended consequences so we put some safeguards in place. The results were both stunning and quite a wakeup call for me. The incentives drove growth, profitability and job satisfaction for the employees who participated.
We started out paying incentives to Parts Counter people and additional incentives to Product Support sales people. We quickly added incentives for other employees and we watched our growth in the incentivized items skyrocket.
Some of the lessons we learned were as follows:
- Pick commodity parts for your Counter and Product Support Sales. Your competition is often Walmart and NAPA and this is a real growth area.
- If you want to incentivize Service then look to rebuild opportunities and add-ons sold when a project is started.
- Incentives will tell you who your best employees are quicker than anything else I can come up with. Measure people on bonuses paid. Make sure you take the size of the market the employee is operating in into account.
- Make it easy on the managers and the employees. You have systems that can easily take care of all the administrative work. I have seen paperwork become a roadblock. Manufacturers love to get huge amounts of paperwork for most of their programs and many people opt out because of it.
- This will drive your inventory group crazy. You can’t base future sales on history when you offer incentives. Have way more inventory than you think you will need. It won’t be enough. Nothing screws this up like running out of inventory.
- Since you are going to be buying more and being a bigger customer- get a better price. Get a much better price. This will fund the incentives and increase profits at the same time.
- Let people know where they stand in company sales. Competition is fun and can push people to be very creative in a positive way.
- Incentives are a great way to help your employees understand what the company values and it will help them direct their activities in very positive ways.
Incentives that are properly directed will change your company. Your Part’s Department will become very customer service directed and your Counter will become a sales machine. Your Service Department will seek our more profitable work that can be planned. You will inevitably make some personnel changes but this usually ends up with getting people into spots more suited to their skills. Employees operating at the highest level will make a great living for themselves and their families while they make the company much more profitable. They will also become much more difficult for you competitors to hire.
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