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Incentive Pay on Customer Service Teams: How To Do It Right

Creating a smart incentive pay program can reward your best employees and raise the bar for everyone on the team.

The inbox is filling up, and reply times are creeping up. You need to find a way to motivate your team to be more productive; otherwise, you face angry customers and a large backlog. Are Incentive pay and bonuses the right way to go?

Less than a third of American workers feel motivated by their job, according to a Gallup poll. That can be a big problem when it comes to trying to increase productivity. Why would agents want to work harder when they aren’t motivated in the first place?

Well, money can be a big motivator. 58% of workers say money is the primary driver in choosing their work. By using monetary incentives, you can encourage agents to work harder and potentially stick around for longer.

In this article, we’ll talk about how to decide whether incentive pay is the right fit for your company. We’ll explain the three principles of an effective incentive pay program, and then we’ll provide a detailed example. Peak Support is a customer service outsourcing company, and this example is a real incentive pay system that we put in place to increase productivity on a 50-person team.

When do incentives make sense?

Implementing incentive pay isn’t always the way to go. Under the right circumstances, this can be one tool in your toolbox. There are some considerations to make before deciding to proceed.

First, incentives cannot replace a strong culture and intrinsic motivation. George Boué, writing for the Society for Human Resource Management says that an “important requirement for incentive plans to be effective is organizational trust between employees and managers.” But when that’s in place, he says, 74% of organizations that have implemented incentives report the plan was “moderate to effective” in achieving its objective.

Second, incentive pay only works when productivity is quantifiable. And it works best for high-volume, Tier 1 tickets – customer conversations that require more process-following and less creativity to address.

If your agents are doing complex knowledge work (as many of our agents are), incentive pay can actually backfire. That’s because people just focus on getting the incentive pay rather than doing the right kind of critical thinking to solve problems.

A study on the effects of goal setting and bonuses found that the increased pressure to hit targets can increase dishonesty. “These unintended negative consequences can lead to dishonesty, unethical behavior, increased risk-taking, escalation of commitment, and depletion of self-control,” reports Bill Becker, co-author of the study at Virginia Tech.

When developing your own pay structure, it’s worth keeping some of these potential roadblocks in mind, especially as you evaluate its success.

The Pillars of a Customer Service Incentive Pay Program

We believe that when deployed correctly, incentivize pay for customer service agents can be a great tool to increase motivation and productivity. Often the money spent rewarding agents is much less than the cost of hiring more agents or retaining customers who are disappointed with slow, poor customer service.

There are three pillars that need to be included in every customer service incentive program:

Simplicity

The goals need to be target based, with easily trackable metrics. It’s vital to have data that you trust and is accurate over an extended period of time. Agents need to know where they stand and how to calculate their pay – otherwise they won’t be able to adjust their performance.

Balance

If you only incentivize quantity or speed, quality will suffer as agents focus on volume to the detriment of everything else. Even incentivizing speed and customer satisfaction isn’t good enough. An agent could get a great CSAT score by giving refunds to anyone who asks – but that doesn’t necessarily mean she’s doing her job.

A good incentive pay system should incorporate productivity targets; customer satisfaction; and a Quality Assurance score that reflects other performance metrics important to the company. If you don’t have a fully developed QA program, you might want to build one before adding incentive pay.

Fit

As mentioned above, incentives aren’t relevant to every team. If the work is complex, or needs to be balanced with other tasks (like working outside of the inbox), you won’t see positive results from the program.

An example of Incentive Pay on a 50-person Team

Here is an example of how we’ve put these principles into practice at one of Peak Support’s clients. Because it considers the above criteria, agents are more motivated; the business is seeing a return on the investment; and customers are consistently happy with the level of service.

Note: the numbers below are illustrative. Use numbers that make sense for your agent’s wages and your business’ bottom line.

Too little and it won’t be effective. Too much and you’ll go out of business!

We’ll give an overview of how it works, and then walk through a specific example.

First, we take the number of perfect CSAT scores. We don’t count negative CSAT scores, to keep it simple and avoid dinging agents for product issues that may be outside their control.

Then, we incorporate a cases per hour (CpH) multiplier. The multiplier will change depending on your business, but here is an example of what it might look like.

Then, there is a second multiplier based on the agent’s Quality Assurance score. Our QA rubric tracks metrics like grammar, brand voice, and whether proper processes are followed. Here’s what the multiplier might look like.

Here’s an example.

Let’s say Agent Annie has 40 perfect CSAT scores, an average of 8 cases per hour, and a 90% QA score. Her bonus would be:

Agent Bernard, by contrast, might have 50 perfect CSAT scores, and 10 cases per hour, but an 85% QA score. Maybe he consistently fails to follow certain important processes. His bonus would be:

Finally, we also add a Service Level Agreement (SLA) bonus on top of the individual bonuses. Meeting SLAs requires the entire team to work together. If people are cherry-picking tickets or not pulling their weight, no one will get the bonus.

Altogether, this formula is easy for us to calculate based on metrics we’re already tracking and it balances out the three most important qualities for us: efficiency, quality, and teamwork.

Managing Incentive-Based Pay

Our team members have been very receptive to incentive-based pay structures and motivated by the structure we’ve put in place. However, managing the overall program has taught us some lessons about putting this new pay structure in place effectively.

Here are a few things to consider during implementation:

Keep Goals Relevant

We wanted to make sure that the criteria we were incentivizing made sense to the team members. The goals needed to be relevant to their day to day work, align with the company’s overarching goals and, are achievable.

Besides being part of an incentive structure, they are also the same goals agents need to hit to do a good job. All these metrics tie in with the performance management program (PMP). If you aren’t consistently hitting your targets, you may be enrolled in the PMP for additional training and support.

Be Transparent with Metrics

In order for agents to trust the program, they need to be able to see the calculations being made. All of our team leads have access to the reports we use for incentive calculation, and trends are discussed during 1:1 meetings. If agents have concerns about the data, they have the ability to raise questions before the pay period is over.

Document it Well

An incentivized pay structure needs to be formalized and documented so that everyone is aware of the requirements. Creating bonuses on the fly is a recipe for disaster because there is no way to track the impact over time. It also means that agents can be confused or misled – leading to decreased employee satisfaction.

Furthermore, the numbers used to calculate each payment should also be documented. Each agent should have a good understanding of how their paycheck is calculated and why they are making the amount of money they are. Having agency over their paycheck allows them to budget correctly and makes the program more motivational.

Reward your employees as they work harder for the business

Make sure to get feedback from employees as you roll out your plan. You may need to adjust or clarify your program many times to get it right.

Peak Support’s Director of Operations, Bianca Lazaro, says: “Don’t beat yourself up in trying to make a perfect plan. It is important to set expectations that nothing is set in stone and there will always be changes. Demand feedback, as that is your best gateway to making it right.”

Track the results

Finally, keep a close eye on the behavior you want to change. If the needle isn’t moving in the direction you expected, the program isn’t working. Motivating your employees might not be the issue.

Your employees work hard for you. It’s only fair they share in the profits. Creating a smart incentive pay program can reward your best employees and raise the bar for everyone on the team.


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Hannah Steiman Hannah Steiman

Hannah Steiman is Chief Operating Officer of Peak Support, a customer service outsourcing company serving high-growth companies. You can connect with her on LinkedIn.

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