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In Focus Consumer Credit

why and look at the incentive scheme, whether your targets are realistic and achievable, your staff, and the company culture.

Structuring When structuring your bonus scheme, make sure to keep it simple so that the criteria for obtaining the incentives are clearly spelled out and approved in writing to avoid any misunderstandings and issues later on. This is very important because,

unfortunately, I have been in the position where my directors have refused to pay the department’s bonus (and an individual’s bonus) when all the targets were achieved or exceeded, just because they did not want to pay out all the money – claiming that the bonus was payable ‘entirely at the management’s discretion’ or ‘there is no contractual entitlement to bonus payments’ regardless of whether it had been agreed. Also do not forget to include a rule

regarding what would happen if you decided to leave the company after the bonus scheme had finished (and was achieved) but before it was paid.

‘Just giving money away’ In some businesses, the thought of having to give a bonus on top of a salary is unpalatable. A business occasionally may require something to be done urgently by its staff. Depending on its importance, your organisation can decide to give you extra resource or it can decide that this can be achieved by using incentives or just demanding it – ‘do it because it is your job’ or ‘you are already being paid a salary to do it’ or ‘if you do not like it, you know where the door is’. Unfortunately I have heard these many times! The dictatorial approach might get

quick results in the short term, but, in my experience, in the long term the best way is always to consider rewarding (which can be non-monetary) your staff for achieving targets or increasing productivity whilst still maintaining quality of work. If you treat people well, then they will often be

October 2015

You want to create a right atmosphere and environment in which employees feel that recognition and incentives are available for good work

prepared to make the extra effort when the pressure is really on without expecting anything. Incentives and bonuses are sometimes

introduced as a last resort to achieve a particular target or when a business is under pressure or not performing well. Therefore, always get your incentive scheme in writing and confirm if it is linked to company performance or just your own department, otherwise you may be in a position that you achieve your targets, but if your business has not, you may not get paid.

A business benefit Management should not think of it as giving away money, because it will be the business that benefits from a healthy and well-structured incentive approach. The better you perform, the better the business performs, and your staff will be even more motivated to grow the business and its profits. In addition, it creates a sense of loyalty, teamwork and commitment, which is more important in the long run than any short-term financial cost. It is essential that directors and managers

create the right atmosphere, team spirit and feeling of camaraderie within a workplace and business for incentives to work. There is no point setting targets that conflict with other departments’ targets – for example: l Sales are delaying or refusing to approve valid credit notes which is stopping credit control from getting queries resolved and invoices paid. l The Transport department is delaying collecting approved uplifts (returns) from customers.

l The Warehouse department is delaying processing non-deliveries and returned goods. l Telesales is processing orders and excluding important information – such as purchase order number, contact name and department – that are vital for an invoice to be approved and paid. l Billings is raising invoices late or incorrectly because they have set up the account wrongly – using the wrong charge rate, billing the wrong name and address, not providing customers with backing reports as agreed, or not quoting vital information. All of these examples are stopping you

from resolving queries and collecting money. This only creates issues, barriers and frustration, as well as losing everyone valuable time and money. There is no doubt that having incentives

in place can be a great way to encourage staff to perform to the best of their abilities and to go that extra mile, but only if you all work together throughout the business.

Conclusion If everyone works together, then you can achieve great things. In one of my previous companies my finance, sales and operations directors were all very focused on customer queries, customer service and working capital. As a team, my department was able to reduce and maintain our over-60-day debtors to less than 1% within a low-value, high-volume business, which was raising over 42,000 invoices per week, and all during a recession. So are bonuses a bad thing? Far from

it! When structured and communicated correctly, an incentive scheme can be a major contributor to success. Used effectively, it can help build teamwork, motivation, focus, engagement, and profits. Finally, never forget the importance of

praising your staff and recognising their achievements if they have done something to earn it. A little bit of praise at the right time can make a very big difference in terms of loyalty and performance. CCR


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