Article: The Counsellor: How to give incentives during fund crunch?

Compensation & Benefits

The Counsellor: How to give incentives during fund crunch?

What is the best way to communicate a mistake once you realise?
The Counsellor: How to give incentives during fund crunch?

People do understand logic and sound business as long as the intentions of the management are not malafide


Vivek Paranjpe, Consultant & Strategic HR Advisor to Reliance Industries answers professional and ethical dilemmas faced by our readers at their workplace.

Question: I am a HR Head of an organization with 100+ employees in the travel industry where most of our employees are in customer-facing roles. Last year, we decided to include a sales incentive plan for all our employees involve in a given sale as we thought it was important to drive a more aggressive behavior towards sales. This policy was very well accepted by everybody and the payouts are expected to be paid at the end of the financial year, i.e. along with the April’s payroll. We have now realized that the sales incentive policy had many problems in its formulation. For example, there are double counting issues when more than one sales person is involved in the sale or there are problems related to revenue where revenue is booked but not collected, and there is huge cash flow issue right now in the organization. To sum up, we cannot actually execute this policy. I know we should have tested the policy better in the beginning, but eventually we face a huge dilemma today. Do we have a legal obligation to make these payments? If we cannot make the payments, what should we do to ensure we do not lose people? How do we communicate the problem to the employees?

Answer: Your company has clearly goofed up in not formulating the sales incentive policy carefully. This looks like a case of over enthusiasm. Your question - do you have a legal obligation to make payments – is very difficult to answer without the full facts of the case being made clear. In any case, you have a moral obligation to meet the commitments that you have made to the team and at the same time protect the interests of the company.
It is always a good idea to come clean. Share with the team the concerns and the design flaws of the program. Explain to the team why the full incentive that was committed cannot be paid, for example, in the case where revenue is booked but not collected. Work out a media such as incentives will be disbursed after revenue collection. Follow the program in spirit and not in words – err on the side of the employees where there are interpretation issues. When you present the logic, rationale and issues in an objective manner, most people will understand. As you do this, create a more rational and logical program that can be administered. Create a recognition program that will ensure the right behaviors that will help you come out of the sticky situation that you are in.
My experience is that people do understand logic and sound business case as long as the intentions of the management are not malafide. Incentives are created to share the success of the company with people, and if the success does not exist there is no sharing.

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Topics: Compensation & Benefits, Employee Relations, #TotalRewards

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