Performance Measures - The Heart of Incentive Plans

Performance Measures Should be Tied to Role Accountabilities

Now, since we have a pretty good idea of how much to pay, we need to consider what it is you are paying for. It is not, or should not be, as simple as just paying for gross profit (net revenue), as you probably need different types of gross profit to run your business.   You need gross profit from existing customers, and you need gross profit from new customers. You need gross profit that maximizes your network, and minimizes your cost to serve. If you only pay your employees for any gross profit dollar that walk in the door, you may find you are getting gross profit dollars that are pretty wrinkly and worn out, when you’d really rather get some nice new crisp bills in hand. So, how to decide what to use in your incentive plan?

You need to start by reviewing your business plan. What are your goals? What is your strategy for achieving the goals?   You need to be clear about how you are going to grow, and how much is coming from new customers (acquisition), existing customers (penetration), retaining customers, and improved negotiation on purchased transportation.   You may be surprised to see retention on this list, but it’s critical to understand your typical attrition rate and focus some effort in the organization on reducing attrition. You can have the best sales organization in the world, but if you lose all your customers after 6 months, then you will never gain any ground. Stop the bleeding first, then consider how you can grow with new customers.

Once you are clear how many dollars will come from each of these areas, you need to clarify which roles in your organization will be responsible for which areas. Here’s a hint: the answer is not “everyone is responsible for everything.” You must have role clarity and you must keep accountabilities to as few as possible per role, to drive maximum results.   If you ask one role to do 10 things, you will never get more than 2 or 3 done well, another 2 to 3 done more or less ok, and 4 to 6 done really poorly. Are you really ok with 40% to 60% of your critical business activities done poorly? You need to segment your roles to allow people to focus and improve performance in the few areas they are assigned.

A simple exercise can help with this. Write down every title in your organization into a table like this:

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*Note: all numbers are illustrative and will vary dramatically by type of freight, experience level of the role, and company specifics. DO NOT adapt these numbers directly for your staff as they will likely be WRONG.

Then, as you can see in the example, fill in each of the sections, starting with ACCOUNTABILITLES and working your way to the right. You should not have more than 10 bullets in the accountabilities section, preferably less. This is not a complete job description, but the top few things that you really fundamentally expect this role to accomplish (not all the details about how they accomplish these results). Expectations are the numbers that go with the accountabilities. Ask: How many? How often? What kind? For sales, think about how many new customers are needed and at what size to hit your new business growth goal. Is repeat freight from a single customer important? What constitutes repeat freight… 10 loads a week or 10 loads a month or 10 loads a day? What do you need from existing customers? New lanes? New types of freight? Be specific and write down the numbers. This will help immeasurably with the development of your incentive plan.


The last step is to think about what measureable items your list points to, as things that matter to the company, are controllable by the person, and can be measured and tracked. Fill in no more than four of these items in the last column. Consider the scope of measurement…will it be at the individual level, team level, or company level? Now step back. You have the beginnings of a really good, balanced compensation plan.

The first three articles addressed the dollars you want and need to pay to create a motivational incentive plan. This article brings to light the things you want and need to measure, by role, to drive your organization to reach its goals. In the next article, we will bring the two strands together.

Performance Measure Selection

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