Entrepreneur Kevin Kelly writes about his experiences running a business in the "My Company" column in Business Week frontier's print edition. His most recent column, "Firing Up the Team," is the lead story in frontier Online and also appeared in the May 24 edition of the magazine. In it, he wrote about how he learned from the unintended consequences of one unsuccessful incentive program -- profit sharing -- and devised a successful safety incentive program. Here are some letters Kelly's experience inspired from other businesspeople:

To the Editor:

The use of safety incentives, a practice called "behavior-based safety," is very controversial among safety professionals. It is a good practice only when there is a thorough safety program in effect. That requires concentration on detecting and eliminating the hazards which cause injuries and illnesses, not just being careful.

There can be some very nasty backlashes that produce much worse problems than those Kelly experienced with his profit-sharing incentives. When employees are rewarded for going injury-free rather than for exhibiting good safety practices, small injuries are underreported or hidden to keep the incentives coming. Anyone who is severely injured becomes the scapegoat, who ruined it for his or her coworkers. I have seen more than one safety-incentive program that concentrated only on reduction of injuries and illness become a sham, ruining worker morale.

Michael E. Shanok, PE
ConnSafe (a safety consulting firm in Hamden, Conn.)
connsafe@snet.net

To the Editor:

As a commercial mover, we too have tried incentives with varying success. Several years ago, we had problems with absenteeism and damaged goods. We created a bonus pool for the crew and cut the amount for tardiness, unexcused absences, and damages. What happened? Instead of fostering a climate that improved procedures, we paid our associates to hide mistakes.

Recently, we instituted the "Duh Award." We encourage our teammates to 'fess up to their errors. The person whose error provides the best learning opportunity each month gets a cash award. We vote on it in our weekly employee "huddles." Now we are rewarding learning, not punishing it.

We also devised an incentive scheme for our head of operations. We practice open-book management, so all our associates understand income statement, balance sheet, and cash-flow concepts. The obvious way to give our operations guy a bonus was a payout based on gross margins (revenues less cost of goods sold, divided by revenues). Cost of goods sold are completely under his control. However, our strategic plan calls for growth, and this traditional method would encourage our operations department to constrain growth -- by keeping expenditures low -- so that the operation would be "in control" and gross margins high. Our Controller helped devise an ingenious twist: Instead of using a percentage as a benchmark, we set a gross margin goal in dollars. To make his goal, our operations guy needs to keep us efficient and accommodate growth.

Our salespeople rely very heavily on our associates to give quality service. We adopted a plan in which each salesperson can reward anyone in the company who's been extra-helpful each month. The winners select from sealed envelopes containing certificates for a variety of rewards.

Who pays for the salespeople's awards? They do -- from their own incentive plan. After going through several sales managers, I concluded that my salespeople didn't want to be managed and made them their own boss. We have a budgeted "sales efficiency" which is measured by the percentage of total sales spent on sales and marketing. We also have dollar targets for total sales. When they meet the targets, any improvement in sales efficiency beyond what was budgeted is evenly divided among the sales team members. The salespeople can hire more staff, do more marketing, play more golf -- whatever it takes. They have an incentive to make wise choices, as they are in effect spending their own money. In addition, they have an incentive not to underspend, or they will not make the dollar target. The company wins several ways. First, these guys are really pumped up, as the potential for dollar payout is huge. Second, the company no longer wastes resources calculating commissions. Third, the guys work together instead of fighting over territory. Finally, our sales have been growing over 40% per year.

Amy Rand
Brian's/BrainCore
New Castle DE 19720
rand@braincore.com

Editor's Note: Letters are edited for clarity and space.