As the owner of a small business, I have always had this question in mind: how can I reward employees in a way that takes into account both the achievement of KPIs and other essential criteria that may not be included in the KPIs but are crucial for the business? Many of these criteria and methods are measurable by HR and other metrics, but accessing these services may be expensive and unattainable for small businesses.
Consider the following scenario: We are a distributor of food products, including chocolates, ice cream, and cakes, each with different profit margins. Each salesperson is expected to achieve $100,000 in sales this month, and if they exceed this amount, they receive a reward.
1- Salesperson A sells $120,000 worth of chocolates to an existing customer and has no other sales. He documents all the necessary information and records it thoroughly in the company’s CRM.
2- Salesperson B sells $120,000 worth of chocolates, ice cream, and cakes to a new customer, but does not properly document the paperwork.
3- Salesperson C sells $121,000 worth of chocolates and ice cream to 5 existing customers and 5 new customers, and thoroughly documents and registers their paperwork in the CRM.

All three salespeople qualify for a reward. How do you pay commission or reward to each salesperson? The common approach is to consider a percentage of the sales amount and pay the commission based on that. In the above example, a 3% commission can be considered for all individuals, but this approach may lead to dissatisfaction and unhappiness among employees over time.
The best way to solve this problem is to use a multi-faceted approach. In this approach, different criteria are taken into account for rewarding, including both achievement of KPIs (e.g., achieving $100,000 in sales) and other side criteria (such as proper documentation and registration in the CRM). Based on the evaluation of these criteria, rewards are determined for different individuals.
For example, the following table can be used to determine rewards for the salespeople:

This table should be made available to the employees, and each employee should be able to easily calculate their own reward and commission.

Calculating the reward for Salesperson A:

Calculating the reward for Salesperson B:

Calculating the reward for Salesperson C:

In this example, rewards are based on both achieving the KPI of sales, proper documentation and etc… Additionally, you can consider other criteria such as improving customer relationships (e.g., the number of phone calls with customers) or punctuality in work (e.g., the number of delays) as side criteria for evaluating employees and determine different rewards based on them.

Using this multi-faceted approach will promote transparency and fairness in rewarding and reduce the likelihood of dissatisfaction and unhappiness among employees due to improper reward allocation. Moreover, it can motivate employees to excel in activities that are crucial for the business and encourage improvement.

Each of these criteria can have a different level of reward. Employing this approach enables employees to not only focus on the targeted goals but also pay attention to supplementary criteria. Employees can comprehensively consider a set of organizational needs and deliver results accordingly.

By Reza

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