Remuneration incentive programs are moving down from the senior executive ranks and out of the traditional sales departments. More and more businesses are realising that the actual question is: can we do without them?

By Duncan Eley

Remuneration incentive programs are moving down from the senior executive ranks and out of the traditional sales departments. More and more businesses are realising that the actual question is: can we do without them?

Well-known Melbourne kitchen and homeware accessory retailer, Matchbox implemented its remuneration incentive program in October 2005. That involved, for the first time, its store managers and area managers. Duncan Eley at DC Strategy interviewed the GM of Matchbox, David Cohen who stated: “The underlying benefit is in understanding the issues that really matter and being able to focus our attention, and the extended management team’s attention, on these”.

Matchbox have instilled a vibrant, new company culture after having reached and exceeded their quarterly targets since the implementation of the program in a tough retail environment.

Some of the concerning responses that are encountered from a variety of organisations in response to the notion of introducing a real remuneration incentive program include:



“I don’t want to divulge sensitive company information to the team.”

“Our company is too small to be able to afford such a program.”

“Our company is too big to be able to implement such a program.”

“We don’t have the systems to adequately track performance.”

“We need to improve and stabilise financial performance before we implement this.”



An effective remuneration incentive program for employees is a source of increased profitability. This is not simply because employees are rewarded for being more productive for the company: a self-fulfilling prophecy. It is because the process of creating and implementing such a program forces an organisation to take a step back and identify the true value drivers for the business.

The consequent steps of aligning the remuneration incentive objectives and assessment with these drivers, enables a full recalibration all the way through the organisation. The key questions to be addressed include:

- What really delivers value to our customers and profit to the business?
- How can employees directly contribute to this value/profit creation?
- How can this value contribution be accurately measured?
- What is the best way of linking the value measured to remuneration reward?


The company wins if employee motivation, productivity and ultimate company financial performance increases. The individual employees win if they know what to achieve, have the means to achieve it and understand the potential rewards. So,what’s the big deal?

The big deal is of course in the implementation………..it’ not the size of the ship, it’s the motion of the ocean. The biggest and best-laid plans can pale into insignificance if the communication, the understanding and the transparency of the implementation process do not stack up.

Cohen from Matchbox comments with a wry smile: “It took some time for the store managers to gain a real understanding of the impact of the remuneration incentive program. The tables have turned now with store managers and area managers requesting more and more detailed information from me every month. They are eager to see the results of their respective monthly performances in order to understand how this impacts the company performance and their location’s performance”.

Back to the often quoted excuses for not investing in a remuneration incentive program:

“I don’t want to divulge sensitive company information…” – with accountability necessarily comes understanding what one is accountable for and the impact this has on business performance. There will be certain aspects of running an organisation that need to be withheld from the masses until the appropriate time. However, transparency on the key value drivers and how every individual can have an impact on these is critical.

“Our company is too small to be able to afford…” – and will not be able to grow at all if the key people in the company do not understand the true value delivery required and are not given a chance to be rewarded for significantly contributing towards this.

“Our company is too big to be able to implement…” – it is no mean feat to implement such an incentive program in any company. The key is to acknowledge that the returns on this incentive investment are correspondingly magnified if the intended impact of the remuneration incentive program can be realised. It must also be noted that the remuneration incentive program will not necessarily extend to the entire organisation, at least at the beginning. Initially the program may only extend to site, location or department managers, then extending further down the chain as the system matures. Critical considerations are, once again: communication, transparency and key stakeholder buy-in.

“We don’t have the systems to adequately track performance…” – and the answer to this could be: therein lies one very significant problem! Any organisation no matter how big or how small must be able to measure its performance. If the current system your organisation is running with doesn’t incorporate a remuneration incentive component; at the very least you must be able to measure successes, failures and corresponding trends in these respective outcomes. Without such measurements it is impossible to effectively address which areas are working and can be developed further to your advantage; and which areas require immediate attention and turnaround in performance. If the drivers behind so-called success and failures cannot be fully understood and attributable to a root cause, then the foundation for future growth and profitability is extremely flimsy.