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Employee motivation techniques: The carrot versus the stick

Posted December 20, 2013  |  written by  |  The Executive Corner

It’s the eternal debate that industry pundits and company executives have argued over for decades: Is positive or negative reinforcement the better method for motivating employees? While there are pros and cons for each method, we’d like to offer our take on this timeless issue–and give you some specifics on our motivation process here at InkHead.

The Stick: Employee Stack Ranking Systems

The employee stack ranking system is a process where the management team reviews employees’ performance and ranks employees within each department on a spectrum from most productive to least productive. Stack ranking has also been called “rank-and-yank” based on a model created by Jack Welch.  During his time at GE, he implemented a system he described as “20-70-10”. He believed that 20% of employees were the most productive, 70% were adequate, and the lowest 10% should be fired. (USA Today)

Those who favor the rank system adhere to its principles for two primary reasons:

  1. Managers are forced to have tough conversations with employees that they might otherwise have avoided, and
  2. Management must articulate the desired criteria for success within the organization

However, the truth is that employee ranking systems can breed morale problems, as well as force employees in competition with one another rely on individual focus as opposed to team play.

The Carrot: Profit Sharing System

Our management team is dedicated to employee growth and development, interdepartmental cooperation, and fostering innovation through collaboration. And while we appreciate and encourage friendly, competitive relationships between our employees, the ultimate measure of our success is what we do as a unit.

With respect to compensation, our model combines the best of both worlds–a company performance-based payout as well as the opportunity for individual employees to influence their bonus money.

Some of the key points to the InkHead profit sharing model:

  • Everyone shares–this ensures that all employees have a stake in our success
  • Compensation is individualized–by department and even roll adding an individual nuance to the compensation plan
  • Sales positions have varying percentages–based on factors like seniority, margin, revenue, average order size, and number of orders
  • Marketing can have additional compensation–based a variety of factors such as number of leads, sales, and opportunities from the various channels they control/influence.
  • Customer service can earn more–based on the number of orders and customers they recover and maintain due to agreeable resolutions

Our low employee turnover rate and total customer satisfaction are evidence that we’re heading in the right direction.

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