My work on incentive schemes provides an interesting perspective on the importance of shaping an approach to data analysis.
Incentive schemes are designed to motivate individual employees, normally sales personnel, to work towards and achieve targets. A well-designed scheme enables employees, if they are doing well, to be rewarded and maintain their high standards. If they are falling behind target, they may be motivated to work harder. Data therefore has a key role to play when constructing and monitoring schemes.
The creation of an incentive scheme essentially comprises of three phases, the first being the design of the scheme itself. Once this has been established, appropriate and fair targets are allocated both regionally and to individuals. The performances of these regions and employees must then be monitored: the scheme needs to analyse whether someone is on track and calculate bonuses.
Key elements
For the initial design of incentive schemes, I partner with an incentives expert. This expert provides direction on what motivates individuals, how an organisation might want to influence their behavior, and how the scheme could be communicated to recipients. My primary role is then translating the scheme design into an operational approach, using data to construct initial targets, and then continual monitoring of performance against those targets to assess bonus entitlement.
One danger that many schemes fall into is that they become backward looking, rather than forward looking; instead of motiviating and incentivising individuals to improve their behaviour, they merely reward for past performance. Individuals are much more engaged in the scheme if the monitoring process not only enables them to understand their current performance, but also gain insight into how they benefit if they were to improve their performance in the future. I design monitoring approaches that communicate the latest data for each individual, and also enable them to explore ‘what-if?’ scenarios about how they can change their behaviour and the consequent benefits they may receive.
Because schemes concern individiuals and personal rewards, it is also essential that meticulous attention to detail is employed. The moment there is a mistake in the analysis it entirely loses its value as, for instance, when an employee might be unfairly subject to an incorrect bonus.
Above all, schemes need to be both simple, so that recipients can understand what is calculated even though they are not analysts, and sufficiently comprehensive to ensure fairness across a variety of environments and objectives. This can be a difficult combination to achieve, but this is where the art of incentive scheme design is to be found!