Incentives for your hardworking team
// August 25th, 2009 // 3 Comments » // Agency Management
Monetary incentives for the team as a form of reward, motivation and recognition is part and parcel of agency management. Do it right, morale will be boosted, productivity will increase and teamwork will be enhanced. Do it wrong, not only it will be counter-productive, relationships within team mates and departments may be affected. Didn’t you hear $$$ is the root of all evil?
Assuming the agency has the following departments/ teams:-
1) Business development / Sales
2) Account servicing / Project management
3) Creative / Technical
Here is the recommendation:-
1) Divide the agency into 2 groups. Put BD as one group, the rest as the 2nd group.
2) Business Development – These people brings in the dough, or should I say new dough. They ‘run’ the marketing department of the agency, making sure the agency is always on the radar and sales leads flow in on a regular basis. They follow up on leads, cultivate them into business opportunities and eventually brings in business.
The commission structure can be structured based on the projected profit for each job. First, the costing for each project needs to be proper and the method to proper costing for digital projects can be found here. The commission for the business development team is based on a certain percentage of the the profit margin. For example, if the base cost of the project is $10,000 and the mark-up margin is 1.8x @ $18,000, the profit margin is $8,000. If the commission is fixed at 3%, the commission payable upon awardment of the project is $240.
Commission should be payable for jobs from new clients for the next 6 consecutive months after the 1st project. Reason is that for new clients, they usually start with small jobs and progressively increase the volume. This will also create the motivation for BD team to follow-up with the client until a more robust relationship is forged. Even though over this 6 months, it can be argued that it may be the Operations team doing most of the job, it is clear that they are also remunerated accordingly.
3) Operations (comprising of AMs/PMs and Production) – The key is to motivate the team to be more efficient, prudent and even to push them harder to put in a few more hours per week. After all, they are the ones delivering at the end of the day.
If the total overheads of the agency is $30k per month, the team will be required to produce work worth that amount. This means that the monthly billing to clients need to be $30k before the incentive scheme kicks in. Incentives are tier-based. I will show you how it works:-
Agency’s overheads = $30k
Monthly billings = $30k to $40k (first $10k profit entitles the team to 5%) = $500
Monthly billings = $40k to $50k (2nd $10k profit entitles the team to another 10%) = $1k
Monthly billings = $50k to $60k (3rd $10k profit entitles the team to an additional 12%) = $1.2k
Monthly billings = $60k and above (Every additional $10k entitles the team to 15% for each $10k)
Assuming the billing of this month is $80k, the incentive will be calculated as:-
1st $10k profit @ 5% ($30k to $40k) = $500
2nd $10k profit @ 10% ($40k to $50k) = $1k
3rd $10k profit @ 12% ($50k to $60k) = $1.2k
4th $10k profit @ 15% ($60k to $70k) = $1.5k
5th $10k profit @ 15% ($70k to $80k) = $1.5k
Total incentive payable to the team = $5.7k
One important point to note is that any outsourced work will have to be deducted off the profits as accordance to the sequence it is being paid out to the external suppliers.
Synergy among different teams
To some extent, structuring the incentive scheme this way creates synergy between the BD and Operations team. Operations will now be willing to push a little harder for sales pitches since whatever that will be brought in will goes into their billable work as well.
Possible pitfalls
Bear in mind that this model is a $-driven model. It does not encourage quality of the work being done. Instead, teams may overly driven to deliver and neglect quality, from customer service perspective to production quality perspective. To ensure the loop is closed, other feedback mechanisms need to be in place:-
1) Customer feedback form / survey
2) Awards
These feedback mechanism be incorporated into the criteria to evaluate individuals for promotions, remuneration reviews and variable bonus at the end of the year.
Not just $$ please…
At the end of the day, it is not just money that motivates people. Middle level managers who lacks managerial skills or motivational skills may solely relying on this as the key driving force and that’s 99% going to backfire. Understanding of individual team members’ need is important. Structuring proper rest/recharge schedule for all is key to rejuvenation. Workshops, seminars and conferences are brain food for the people. When it comes to motivation, think macro and micro.
