Case Example 2: Reinforcing Organizational Effectiveness Through Management Incentives

Scenario

A small, successful company that stores, manages, and protects records, media and electronic data operates out of two storage sites. They pick up, store (often as permanent archives), retrieve and deliver paper and computer tape files (now done electronically as well). Accuracy, timely service and security are critical service factors in this competitive industry.

The President was concerned about service quality, due in part to a "cultural barrier" between the "front" (office and female) and "back" (storage operations and male) employees. He wanted an incentive compensation program that would assure competitive compensation levels, encourage better coordination of effort and ultimately improve the quality of service.

What We Did

We met with the five key managers and the President on a confidential basis to discuss their job responsibilities and explore performance indicators that would tell how well they were doing. We also discussed ideas for improving organizational effectiveness and improving the quality of service.

We analyzed their current compensation levels (base salary and total cash) against a variety of outside survey data of comparable jobs in comparable companies. We then developed a complete incentive compensation framework that would both encourage team performance and individual effort that contributes to overall performance improvement. Employees would now have "a stake" in improving service quality and operating efficiency.

Outcome

The resulting incentive compensation program would pay out based on: two common measures (corporate profit, from which any incentives would be paid; and results of a Customer Service Questionnaire, which we developed to reflect their corporate values); one shared measure such as Site Error Rate (shared by each Site Manager and Customer Service Manager); and Individual measures (such as transactions per hour for site managers, number of valid customer complaints per week, or another measure proposed by each participant to reflect perceived performance improvement priorities).

Because the concept of incentives was new to this organization, the implementation approach (content and process) was especially important. We introduced the incentive plan to participants via group meetings in which plenty of time was available for discussion, questions, and "what ifs." We also helped establish administrative procedures needed to maintain and update the process.

The incentive framework is still in place, updated annually to reflect current business plans, service improvement opportunities and customer requests/needs.

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