Retailers relate incentive program successes

TTMPLOYEE incentives are a hot Eopra or conversatron tnese oays, but just how effective are they?

A group of dealers participating in a Mountain States Lumber and Building Material Dealers Association's workshop were enthusiastic about them although they all had different approaches, ranging from encouraging friendly competition among employees to developing team spirit.

The caution which applied to all uses of incentives was to be sure that the bonus program was a bonus, something extra and not a regular part of the pay check. A true bonus should be subject to withdrawal and change at any time. These precautions are necessary to avoid problems with wage and labor laws.

Dave Stringham at Stringham Lumber Co., Salt lake City, Ut., tries to structure his bonus Programs so that everyone is a winner. He likes to have fun with the program, writing things like "World's Greatest Salesman" on the check and posting it so that the recipient gains recognition and other employees are motivated to similar accomplishments.

Came type incentives work for him. Pass-the-buck starts on Monday morning with a $20 bill going the rounds and staying with the Person who has the highest sales for the week. He also gives a bonus for coming to work on time everY daY, taking Iunch and not leaving before quitting time.

Kent Brosh at Crissy Fowler Lumber Co., Colorado Springs, Co., has an idea box and an employee board of five people to evaluate the requests for action. Bonuses for $50, $100 and such are paid for ideas judged worthy of being put to use.

Jerry Woodward, Jerry Woodward Lumber Co., has been using an indepth incentive program since 1982. Both his operations in I-as Cruces, N.M.,and El Paso, Tx., are involved in the program although he changed the method of determining bonuses when he put the incentive system into effect in his Texas operation.

At his las Cruces facility a percentage figure is used based on the gross profit generated by each sales person. A computer keeps accurate records for this function. Using this method, his sales manager has almost tripled hisl98l income which before was based on an hourly rate. Other salesmen have doubled their salaries, resulting in an increase of overall gross profit. Punctuality has improved as a fringe benefit of the program because whoever writes the ticket gets the credit for sale.

Story at a Glance

How to calculate incentives... pitfalls and pluses of various programs...wage and labor law requirements...reactions of employers and emPloYees.

His El Paso operation uses a second method for compensating the salesmen. A percentage of gross Profit is put into a common pool and each of the three salesmen draws a portion of this total for his compensation. The side effect of this is excellence in team effort.

Incentive programs can work outside of sales too. The credit collections man at Woodward's is rewarded for speeding up average collection days. For each day cut offofa 45 daY collection, he receives a $100 bonus' The result was last year's collection days got as low as 34 days. If collections average $12,000 a day that translates to $132,000 extra in your bank account.

Order pullers are tracked bY the volume of material they load. Each quarter they get a check for a percent- age of the total dollar volume of their loads.

Yard service men are given a small bonus for each ticket they fill. The yard manager gets a bonus if he keeps delivery costs below a set percentage of sales.

Tiuck drivers get most of the deductible on their insurance if they have no accidents. As a Christmas bonus employees get the unused portion of the deductible on their health insurance. Long haul drivers are paid a bonus based on fuel savings over a three month period.

Commission percentages are confidential. Each employee discusses his percentage separately with management. The importance of confidentiality is stressed.

The company has profited from the incentive plan. There has been a very positive effect on gross profit margins for the yard, which is 9990 contractor trade. Every sales person has at least doubled his salary and two have more than tripled their salaries since 1981.

When Woodward acquired his El Paso yard, he instituted the same incentive plan with some changes. Instead of basing the percentage on the salaries which his salesmen were making, he established a percentage of the gross profit as the incentive pool. It is divided among the salesmen according to a percentage set by their past records and abilities. Since they share a percentage of the total gross profit, as opposed to sales, there is more team effort, according to Woodward.

A number of general precautions to be observed in the application of incentives were revealed during the seminar. Incentive progrirms need not be ongoing. They can be set uP for sPecific periods, but not at the same time as other special advertising or marketing programs. Employers should set specific goals for what is expected, put the program in writing, and apply it on a trial basis.

Incentive progr.rms should be delContirtued c,n page 59)

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