Challenge
A manufacturing company had target setting done only for sales and their incentives were percentage of sales orders booked. This lead to the following:
- All other departments demanded performance incentives sighting high pay of sales team
- Sales orders were booked to meet targets with high credit period offer creating cash flow crunch
- High expenses were incurred for sales
Solution
Work type of all departments was evaluated, performance parameters were designed and agreed upon for each department. Parameters were divided into Qualifiers and Focus. Qualifier parameters are those where if target is not met incentives will be zero, no matter the performance on other parameters. Targets for each performance parameter was set keeping in view the recent performance and a point based scorecard system was designed for incentives across all departments
Benefits
- Performance based incentives were created – lead to reduction in turn around time by 34%
- Credit period offered came under 3 months
- Sales expenses reduced by 8% whilst sales jumped by 12%