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Incentive Programs

Incentive Programs

Show Me The Money!

We all know that there are times when it takes a little push to motivate your employees. When the logic and reasoning of your arguments get lost in the rat-race of the daily routine, you may have to add a bit of an incentive.

There are a number of programs a small retailer might want to consider outlined below. Keep in mind that a review of Canadian tax law is recommended – you can start here CRA Benefits. An incentive paid to an employee to perform a function may be considered taxable income. Likewise, if your incentive program involves placing the employee into a random draw of sorts, you might want to check in with the various provincial gaming laws language to see if you are within the parameters of the law.

I am a fan of incentive programs. I am a fan because I have used them before and brought back millions of dollars to the bottom line.

Here are some programs to consider.

Tips Line

In exchange for reporting of anonymous tips on employee theft, the reporting employee receives a monetary reward as a set amount or as a percent of the total recovered if a successful arrest is made. Anonymity is maintained by using a third-party reporting agency to track via a code number generated. The code is essentially used to cash in on the reward. (see the tax issue? Who do you tax?)

War on Waste

This is a program whereby ideas are encouraged for policy, programs, systems changes that may be a contributor to losses within a company. If suggestions are implemented, the best (most financially beneficial) receives the highest of three awards. This is not a program that can go on for eternity as you will reach a saturation point where the reward is greater than the savings.

From a marketing perspective, this is a nice program given the acronym is W.O.W. and you can do a lot around that when communicating the top ideas. I ran one of these programs and in the 3rd year the suggestion to cancel the program and eliminate the payout was the idea with the best ROI – believe it or not. This happened because all of the great ideas – the ones that give the most bang for the buck, were tabled in the first 2 years.

Group Incentive

If you run a larger organization, group incentives promote teamwork. I ran a program of this nature and it was by far the most effective program in reducing shrinkage. It ran for 3 years, the payout was in the millions, but the savings were much greater than the payout and there was a huge improvement to the bottom line. After 3 years the program morphed into a profit incentive program, incorporating shrinkage in as a metric, but focussing on the bottom line as a whole.

Whether you run an individual or group program, there are steps to take before implementing your program.

Incentive programs are a great way to klick start your loss prevention initiatives

Check the Legal and Tax Implications

As I said, depending on how you reward the employee the payment might be considered taxable. If you want to guarantee the amount you promote, you will need to budget the top up amount to cover the taxes so the employee gets the full value as net income.

Involve all Stakeholders

Have your finance expert look at the dollars and “sense” of the program. If it costs more than the recovery you need to make assume options on the financial deterrent value. That takes a lot of experience, brainstorming, and math.

Involve HR

These programs are huge engagement initiatives as they involve all employees in the solution. But there is an unintended consequence you need to consider. “Big Brother” watching. Some organizations have a culture whereby imposing this type of incentive may not appear to be so friendly. While I refrain from any commentary on third-party representation, if the company has a union there are other things to consider.

Count Down to Launch

If you introduce this program, have your communication team help out with build-up up, the anticipation. That alone will have an incredible deterrent value. Sell it as the CEOs commitment to transparency, and talk up the program as an enabler to meet this goal.

Launch and Watch the Bottom Line Grow!

On a final note, if you are considering a third party to manage the program, you are well on your way to implementing a full whistleblower program. This has huge benefits especially if you are publicly traded company. Email me to learn more about Whistleblower. As a subscriber, you also qualify for a group discount under Bottom Line Matters.

About Stephen O'Keefe

As an independent consultant I leverage my experience and knowledge to help a number of companies achieve results. Clients range from non-retailers looking for guidance to serve their retail customer, to retailers looking for quick solutions to unique and costly problems, right to the Industry Association. Bottom line Matters!

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