Case Study - Employee Incentives 

Construction Business 

The Problem 

This business supplied and installed facilities at their clients' site. The owners were trying to grow the business and needed performance from their sales team across a number of areas including:- 

  • High levels of customer service to create advocacy 

  • Detailed briefing for production and site workers 

  • Job profitability 

Sales staff were remunerated by base salary plus a commission on the value of their invoiced sales each month. This created the following issues for the business:- 

  • Sales staff aimed to maximise the value of their total sales each month, and were not focused on making sure the sales were profitable. 

  • Discounting of products became more frequent. 

  • After sales responsibilities and project management were not prioritised as these didn't directly impact remuneration. 

  • Poor performing sales staff were paid a commission on sales despite not selling enough to cover their own running costs. 

The Action 

The incentive system was changed to set a hurdle rate of invoiced sales each month before sales staff were eligible for a commission. This hurdle rate was sufficient to contribute enough margin to cover the running costs of each salesperson. 

A balanced scorecard system was implemented which outlined all of the key components of the sales role that were critical to meeting the objectives of the owners. Management would then score each area of performance which gave an overall rating in each review period.  

A retention system was implemented where 25% of the commission payments were withheld from the monthly commission payments and pooled until the review period. The rating from the balanced scorecard over the period would then determine how much of the pool would be paid out to the employee. 

The Results 

Sales staff understood and accepted the reasons for the change as they could see how the new system provided the platform for the future success of the business. 

The 25% retention was a significant enough amount to change behaviour and improve performance across all areas.  

The interests of the owners and the sales staff were now aligned.