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HUMAN RESOURCES

Incentives: The Customer-Driven Bonus Plan

A CEO details his company's incentive plan, including the price of such a plan and how well it's working.
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Alarm bells went off for Irv Shapiro when he read Raving Fans, Ken Blanchard's parable about how to turn customers into your biggest boosters. Shapiro recalls summoning his managers and asking, "How many of our clients are actively referring customers to us?" Everyone looked around and shrugged. Days later, the answer came back: 25% at best.

"We've learned that customers can say they're happy with our level of service but would never recommend us to another company," says Shapiro, CEO of $7.9-million Metamor Technologies, a Chicago computer consulting company. So he created an employee-bonus system that rewards employees whose customers agree to be references.

Here's how the incentive plan works: all employees qualify for a quarterly bonus (equal to as much as 10% of their salary) based on several performance measures, including input from customers. In fact, 40% of the potential bonus is tied to customer feedback. Four times a year, as well as at the conclusion of major projects, Metamor's supervisors call the 30 or so active corporate clients. Customers are asked if they're satisfied with their assigned team's ability to communicate, solve problems, and respond to their needs -- and, if so, would they be willing to serve as a reference?

Shapiro doesn't burden customers with lengthy evaluation forms. After talking to customers, the supervisors rate employees on a scale of one to five for each area of customer service. Dissatisfied customers are weighed more heavily.

Supervisors meet one-on-one with all employees to discuss the results. If a client agrees to be a reference and gives high marks across the board, the employee typically earns the maximum amount for customer service. Recently, a customer asked Metamor to design a computer training curriculum on the fly and teach classes to its staff in Chicago, Singapore, and France. That sort of job usually takes three months. Metamor's team completed it in eight weeks. "The customer was so surprised," says Shapiro. And its gratitude was reflected in each team member's quarterly bonus, which averaged $1,800.

Last year Shapiro's pay-for-performance plan paid out $500,000, of which customer-service bonuses tallied close to $200,000. Shapiro has no plans to cut back the program. Why would he? Word-of-mouth advertising is worth more than ever. In five years his average contract has grown 10-fold, to about $200,000. Today about 75% of his current accounts sing Metamor's praises to their friends. -- Stephanie Gruner

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Last updated: Nov 1, 1995




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