The concept of workplace incentives is nothing new. In fact, it’s probably one of the most archaic — yet proven — ways to improve sales, processes or any particular work activity.

Depending on how incentives are introduced and implemented, the results can be outstanding. However, it’s important to dive into the world of incentives to ensure your program doesn’t backfire to diminish sales, productivity or profitability. 

Too many executives say something like, “Why do I need to incentivize my staff when we’ve already agreed upon a compensation package to perform the job’s tasks?” This mentality assumes every employee works at 100 percent capacity with 100 percent effort. The reality is employees are human and act as such. If they’re eligible to earn something great, many will push to go above expectations. Incentives work. 

Seven ways to introduce incentives

There are many strategies to introduce incentives. These are in no particular order, and each method is best applied to cater to your HVAC construction business model and goals.

1. Commission-based bonuses. This may be the most common way to increase sales by applying a specific or tiered percentage based on sales volume. If a staffer gets a 5 percent commission and his or her accounts generate $10,000 in sales, that person would receive $500.

2. Target-based bonuses. Reward those employees who meet specific criteria based on set goals. Here, the target could be a revenue range that triggers variable bonus. For example, $10,000 in sales yields a 5 percent commission, and $20,000 in sales is incentivized with a 6 percent commission.
Managers can also set minimums to start earning commissions in an effort to not reward sub-par sales. Remember, incentives are meant to be earned — not given.

3. Conversion bonuses. Many HVAC sales and service companies get started with one job and parlay that visit into other goods or services. Consider offering an additional reward to employees who successfully add a new service or product to a job that was not part of its original scope.

4. Percentage of growth on a specific program. Employees who feel they have a sense of ownership on a new product or service are more inclined to champion that new program. To drive more engagement and yield stronger results, companies offer a percentage of the revenue for the specific program. This strategy is especially popular with new product or service launches.

5. Attendance-based bonuses. Absenteeism costs money. Use a small multiplier to an employee’s salary based on minimizing missed days in a specific period. The fewer days missed, the better the reward. 

6. Percentage of event-based profits. This concept works best when selling goods or services at trade shows or during service visits. Focus on a specific event and create unique incentives to boost sales with a targeted audience.

7. Percentage of retail profits. This approach is best for sales managers or executives who have a governing role over a specific sales channel. Notice this is based on profits, not revenue, to strengthen the bottom line.

Monetary rewards

As its name implied, monetary incentives include cash, stock options, profit sharing and anything else directly related to employee compensation. A non-monetary incentive is a reward given that promises an opportunity unrelated to financial compensation. Each type of incentive has clear pros and cons, and can be applied to nearly any aspect of your HVAC or sheet metal products business. 

Monetary incentives

The most common type of incentive is monetary, and it’s ideal for four reasons. First, these bonuses are best applied when an employee is motivated by cash. If you’re looking to achieve a short-term goal, money is a great avenue to push sales. Next, monetary incentives create an easy and straightforward way to influence behavior. Finally, it offers more control on each employee’s income level. 

Keep in mind that monetary incentives have some downsides as well. They can demotivate employees who barely missed a particular goal. If cash is often used as motivation, it can be viewed as an entitlement versus an incentive. 

Monetary bonuses may create unintended consequences. For example, say an employee gets a percentage of gross sales starting at $10,000 a month in revenue. With five days left in that month, he or she has generated $7,000. To hit the $10,000 goal, the employee may offer deeper discounts and diminish profit margins to meet the commission minimum. In this example, the employee met the criteria to earn a cash bonus, but the company may actually lose money due to the salesperson’s behavior. When offering monetary incentives, be sure to protect your profit margins.

Non-monetary incentives

If you’re looking for ways to drive work quality, career development or increased job satisfaction, non-monetary incentives are the way to go. These types of bonuses have a bigger impact on staff morale than cash-based awards. Also, non-monetary programs foster employee engagement, which leads to less staff turnover. Lastly, cashless rewards can be peer voted instead of having each person meet corporate goals. 

Two main factors can be viewed as downsides to non-monetary awards. First, they do not affect employees’ incomes. And second, they have less of an impact on short-term goals. 

One of the best incentives is praise and recognition for all to see. Eighty percent of employees work harder when they feel appreciated. It’s amazing what compliments and public admiration can do to the psyche of your staff members. 

Overall, monetary incentives are based on cash. Just be creative with the goals you set to maximize the return on investment. Non-monetary incentives can be anything, including short vacation packages, a fully paid golf or fishing trip, free lunch for a day or week, movie tickets, plaques or trophies, flexible work schedules and more.

Whatever incentive you decide is best, realize that goals change and motivational factors differ between each employee. The key is to match your company’s initiatives with the strongest incentive possible to boost sales while strengthening bottom-line profitability. When implemented well, employees will work harder, longer and be more satisfied, which is the ultimate win-win. 

Cliff Budnick, who holds a master’s in business, is vice president of new-business development at In-O-Vate Dryer Technologies.
For reprints of this article, contact Jill DeVries at (248) 244-1726 or email devriesj@bnpmedia.com.