There is good and bad in everything, they say, and pay for performance is no different. The model, which links compensation to achievement of specific goals and to work quality, is often used by contact centers to incentivize agents, but it is not always a good fit for all environments.
Organizational psychologist Marc Prine said that pay for performance is a great structure to drive people to achieve goals and reinforce behaviors.
“Pay for performance is seen to be very effective in sales settings. In a contact center environment, it can be very beneficial because it will directly give employees the understanding of what their organization values and exactly what they need to do in order to be successful,” he said, adding that a significant pro of the pay for performance model is that it is self-reinforcing. “People track their progress toward goals and can see in their paycheck exactly how they performed.”
Brandon Knight, CorvisaCloud’s vice president of solutions engineering, said that one of the benefits of pay for performance is the equality it creates among associates. “Since all the information must be shared, there is transparency in the standings,” he said.
Another positive, he said, is that you are giving the associate the ability to have control over their income by being rewarded for working harder. Knight said that typically these models work best in sales, lead generation, appointment setting or transaction-based environments.
Prine noted that this model is difficult to implement when there are many facets of an individual’s job. “If you tie pay to one aspect and not others, the other aspects of the position might suffer,” he said. “It works very well with sales and manufacturing because the employee has one focus and it is easily quantifiable.”
There are challenges to such a model, however. Prine said that one of the challenges is in understanding exactly what behaviors you want to be associating to performance. “It is important that whatever behaviors are measurable, attainable and very clear. Understanding the role of the contact center and what will make the organization successful need to be the metrics that drive the employees,” he said. “Reinforcements such as pay for performance are very strong at driving the employees in a particular direction, make sure that you know what road you want to drive down.”
Laleh Hassibi, Senior Manager at PayScale, said that the major consideration regarding pay related to performance for these jobs is not an employee’s base pay.
“For some businesses, call center managers can access statistics for workers in that industry to get a baseline for evaluation. This is especially helpful when it’s all about the numbers, such as sales, a call center or retail environment. Regardless of industry, employers need to understand the baseline, but also be careful not to use assumptions as a benchmark since workforce analytics is based on real-world data reflecting the market at that moment, not goals or guesses,” she said.
Hassibi advised that to establish the initial structure for pay for performance, contact centers should determine the factors they will base their evaluations on and then use those to guide a kick-starter evaluation.
“Depending on the type of work the call center is evaluating, a manager may use averages for performance, such as call time, amount sold, number of claims processed and so on, a quiz to test knowledge, a standard evaluation form for supervisors or peers to complete, or another method,” she said. “Once you’ve gathered the numbers, it’s time to compile them and establish criteria for compensation based on performance, such as below average, average and above average.”
Knight emphasized that pay for performance does not work in all environments and the maintenance of the system (KPIs, tracking, trending, reporting and rewarding) can be taxing and time consuming.
“In addition, there is the potential for associates not to agree on the KPIs being used, which can have a negative effect on team morale,” he said. Knight added that one of the challenges to implementing such a system is obtaining collective agreement on which KPS (metrics) are going to be used and at what percentages.
“Effectively communicating the system to the staff, and ensuring your tracking/reporting quickly and easily identifies associates attempting to ‘game’ the system can also be challenging,” he said.
Knight has experienced both successful and unsuccessful implementation of the system, both at Fortune 100 companies. With a top appointment setter/sales team for insurance, it worked extremely well. “After just 45 days, there was almost an 11 percent increase in both quantity and quality of sales. It continued to improve and we continually adjusted the P4P qualifications to keep pace with the growth,” he said.
For a top wireless phone carrier, however, it was not as effective. “It was implemented with the customer service division. One of the main flaws was the metrics being measured were not conducive to the agent providing world-class customer service,” Knight said. “The agents became more concerned with talk time and number of calls handled instead of one-call resolution and quality experiences. Further, the associates that were already great and caring customer service agents saw it as a detraction from the mission and vision of the company.”
Knight offered the following advice to contact centers wanting to implement the pay for performance model:
- Do your homework. Research and talk with other call center leaders or consultants who have actually done it before. “This is not a cliff you simply walk up to and jump. There is great reward in successfully instituting a Pay for Performance plan, but there are great pitfalls if you implement it without sufficient forethought,” he said.
- Make sure you are in a market with a labor pool and salary where additional pay translates into better performance. Once you identify the KPIs you are going to use, pick a time period and look at those metrics for the top 20% of your staff. Use this as the bar for the base payout and allow for increments beyond that.
- Avoid a max/cap payout if you can. “Usually this can be accomplished by tying the payout to additional/existing revenue generated by the better performance,” Knight added.
- Use short-term periods for payout of the P4P. Monthly is best, since call centers tend to be high turnover, low tenured staff.
- Ensure whatever the goals are, they can be obtained by at least 20 percent of the staff applying themselves.
Prine said that best practice in this context involves starting with the organizational strategy and working your way down to what the individuals collectively need to accomplish in order for the strategy to be successful.
He said: “It might be a good idea to pilot this before doing an overwhelming change and see how it works with a small sample of employees. Clear expectations and continuous feedback will drive performance. Just make sure it is the type of performance you want to be driving.”
Pay for performance has its merits, but as with any model it does not work in every situation. As Knight noted: “Correctly implemented in the right situation, Pay for Performance can be an effective tool. But a poorly thought-out implementation can have a severely adverse effect on your associates.”
This article was originally appeared on NSAM sister publication Customer Experience Report.