Mae Lon Ding, President, Personnel Systems Associates Inc.
Referral bonuses for employees are a great idea for generating additional business. General employees of the company are not a substitute for your dedicated sales force, but there may be an opportunity for them to have a significant impact. Referral bonuses work particularly well for professional and service firms where large dollar contracts are typical. For employees whose main job is not sales, providing a set bonus amount is easy and can be effective. This is similar to the referral bonuses that companies give to employees who refer another potential employee to the company that results in a hire. It is effective to give $50 for a referral to any prospect (who meets specific qualifying criteria), that has requested that a company sales representative contact them combined with a $500 success payment for a contract signed. I have seen some firms giving as much as 5% of the revenue actually collected on a new business referral.
Training Increases Success
If the goal is to motivate the general employee population to sell company services (rather than merely give recognition), then you need to train them on how to identify good prospects (i.e. the observable characteristics of organizations that are likely to want to use your services), approach prospects (What do you say to a good prospect to make them want to know more about your services?), and make the handoff to the real sales people in the organization (procedure for documenting the referral and making the introduction). It is also important to let employees know that you are not asking them to "push" an unwanted service on others. I suggest that you tell them that they are approaching prospective customers in a spirit of helpfulness to the potential customer. Tell them that they should not be discouraged when it turns out that some potential customers show a disinterest in the service. It is likely that some will be interested in hearing more about your services (This is the time to make the handoff to the sales department.) and some won't.
Other Ways to Encourage and Support
It is a good idea to give employees marketing materials that they can use to present your services in both electronic and paper form. I also recommend that companies announce to employees and celebrate new business that comes from employee referrals. This keeps the idea fresh in everyone's minds and encourages them that others have been successful so maybe they can be successful too.
It is important to have a good way to track the prospecting process and to have clear criteria and methods for attributing business to the referral source. What happens if you were already talking to the prospect prior to the introduction from the employee? There could be bad feelings if you aren't clear up front about how these types of situations are handled. In addition, you will need to consider reducing or eliminating the sales compensation for sales people in these type of referral situations since you are in essence already paying a commission to someone else.
Profit Sharing to Encourage Business Growth
It is also a great idea to consider a company profit sharing plan in conjunction with provide training to employees on customer services practices that lead to continued and expanded business with current clients such as suggesting additional services that the customer is not currently utilizing and such as simply providing great service. More work and more customers should be perceived by employees as a good thing, rather than as a "burden" for which there is no additional rewards. The profit sharing plan also serves to remind people to be alert to opportunities for efficiency and cost savings.
Bonus plans can be very motivating if the participant in the bonus plan believes that they have confidence that they can be successful in bringing business in (train them), they understand and believe strongly in the benefits of your service to customers (training helps here too), and if they believe that the rewards are commensurate with the effort required (be generous).
For more tips about driving business success with employee compensation see free articles and internet links on our web site or contact:
Mae Lon Ding
Personnel Systems Associates, Inc.
Compensation & Performance Management Consultants