Your employee incentive program is just a line item based on what Human Resources or your sales team has put in place for the year, right? It can be. But getting a CFO involved will help you make sure your program stays tied to the results and profitability of the business — no matter what areas are driving that growth.

Most incentive programs are tied to either top-line sales or bottom-line profitability, ensuring your employees share in a percentage of the company’s additional profits if you achieve better-than-expected financial results.

But these profit-driven programs can often take too long to measure and pay out to employees as incentives for their contributions because they’re based on quarterly or annual numbers. 

And what about the other crucial members of your team who aren’t involved in customer-facing or revenue-generating work? These employees can feel overlooked or undervalued, leading to dangerous dips in their engagement.

Use metric-based incentives to boost engagement across your whole team

Gallup found that nearly half (47%) of employees in the United States and Canada are watching for or actively looking for a new job. In today’s competitive employee landscape, profit-driven programs might not achieve the employee retention that you want, resulting in more money spent recruiting and training new employees.

Gallup research also shows that employees who receive great recognition from their organization are 20 times as likely to be engaged as those who don’t receive it. Incentive programs are just one of many ways to recognize employees, of course, but they’re certainly effective. By creating programs that recognize and reward employees in all areas of your company, you can increase engagement and keep your valuable team on board. 

Tying incentive programs into operational metrics within the budgeting process with the CFO can help you build more creative and timely incentive programs.

For instance, in retail, conversion is a metric measuring the number of transactions against store traffic (the number of people coming into the store). For most stores, 20% is a reasonable expectation, so setting a target of 22% is an achievable goal that would have a significant impact on sales.

You could then measure the sales and margin lift from a 2% gain and set a payout for your employees as a percentage of that amount. You can set goals for the day, week, or month to let employees see faster results from their efforts. 

At a retail company I worked at, we set a strategic goal of achieving 25% conversion by 2005. It was 2000, and we were running 20% conversion. To achieve it, we set targets to improve each month by 1.25% over the prior year’s goal. There was a payout to the management team each month that they used to distribute gift cards and throw parties for their teams when they met that goal. 

The frequent recognition created the engaging environment the store teams needed to excel. By 2005, we achieved 25% conversion in the last half of the year.

It was a measure of engagement and product knowledge, as well as customer service. The top line and margin improved, as did labor efficiency — and it meant millions of dollars to the bottom line of the company.

Find the right ways to implement incentive programs with a Fractional CFO

Fractional CFOs are in a unique position to look at the metrics and drivers of the business from the manufacturing and/or purchasing process all the way through the service and selling process. Because Fractional CFOs have deep, varied experience across many businesses, they know which parts of your company’s operations drive higher sales or margins and lower costs.

They can also measure how much an improvement in these areas of your business means to the financial results. With this data, they can help you create an incentive program tied to those metric or process improvements.

Taking this approach means you can roll the program out to groups who feel further away from the sales process, allowing you to include employees who have a direct influence on the final results — wherever they work in your organization.

The result is more engaged employees working toward a specific goal and sharing in the rewards of achieving it. 

The right Fractional CFO will help you see the big picture of your business and ensure you’re looking ahead to what comes next — not just what happened in the past. From incentive programs to cash flow and beyond, our team of Fractional CFOs has the experience you need to guide your business in the right direction. 

To bring a trusted, expert Fractional CFO to your Kansas City business, contact Tommy James at tommy@crowncfo.com.