Get sold on training incentives
For decades, most retailers sweetened sales employees’ compensation packages with incentives tied to performance — how much they sell. To keep pace with today’s information-empowered customers, some retailers and other employers now reward workers for their training performance — how much they know.
At Hudson Trail Outfitters, a Maryland-based outdoor-gear retailer with roughly 300 employees at five stores, 95 percent of sales employees participate in a three-pronged training program. Each facet offers different incentives for completion. Ever since the company introduced the program about a decade ago, the average tenure of sales employees has increased 30%, reports general manager Sandy Cohan. He emphasizes that these efforts align with — and further — an organizational culture that values outdoor experiences.
“Our people respond better to gear incentives than they do to cash,” Cohan explains. “We’ve tried everything when it comes to training incentives, and we found that our people work twice as hard and get twice as jazzed when they earn a free jacket as opposed to a bonus check.”
In addition to remaining with the company longer, Hudson Trail employees who complete more training tend to receive more promotions and wage increases because the training helps them sell more as measured by sales per hour, units per transaction and average ticket sales, Cohan reports.
To be effective, training incentives should be culturally appropriate and should support the overall compensation strategy. “The payout for training should not overshadow the monthly or quarterly [sales] incentives available to the individual,” advises Ted Briggs, principal for Better Sales Comp Consultants in Palm Springs, Calif.
“Tie training incentives to business goals,” asserts Jesse Schlueter, VP global learning for Dunkin’ Brands in Canton, Mass. The restaurant franchisor, whose brands include Dunkin’ Donuts and Baskin-Robbins, designs many training incentive programs. Franchise owners and store managers can choose to use the programs for their employees.
Yet many training incentive programs neglect to tie incentives to culture, compensation strategy or both. David Almeda, chief people officer for Kronos Inc., says too many retailers rely too heavily on product-specific incentives given to salespeople for selling specific products, often after receiving product-specific training from vendors. This approach often yields negative side effects — when, for instance, the salesperson neglects to meet customers’ needs — notes Almeda, who was an HR executive at Staples before joining Kronos in 2010.
To develop training incentive programs that drive sales and other types of productivity measures, therefore, human resource managers should understand:
- The rising importance of training.
- Leading practices in delivering and rewarding training.
- How to align training and training incentives with organizational culture as well as business goals.
Keeping up with customers
Maryam Morse, the Dallas-based national reward practice leader of Hay Group’s retail practice, says more retailers will consider using training incentives to encourage front-line employees to keep up with well-informed customers.
Customers have “already researched the brand, the latest product and all of its features,” Morse explains. Retailers say they “need to keep their employees educated to the same level of knowledge.”
Shawn Rossi, the Atlanta-based leader of Mercer’s sales performance business in North America, advises HR, training and store managers that knowledge has value only if employees use it to positively influence business outcomes such as store revenue and customer satisfaction. He suggests that training incentives should relate to these outcomes.
Companies with training incentive programs typically use a range of enticements to reward specific knowledge acquisition milestones. For instance, Dunkin’ Brands training incentives include recognition (such as certificates or trophies for stores), cash awards, internal “money” employees can accumulate to cash in for gifts, and even field trips to meet with the executive chefs of Dunkin’ Donuts or Baskin-Robbins.
The various incentives work together. For instance, a Dunkin’ Donuts employee — known internally as a “crew member” — wanted to work more shifts but had limited experience in positions that were open during his desired time slots. So the crew member took the initiative to train on other stations during his existing shifts. He learned how to prepare sandwiches at the sandwich station, for instance. After completing the necessary courses and gaining the competencies to qualify to work during the available shifts, the restaurant manager rewarded the crew member with a $25 iTunes gift card — and more shifts. By expanding his knowledge, the crew member provided more value to the manager, who gained greater scheduling flexibility.
In addition to this type of training reward, many Dunkin’ Donuts crew members, depending on individual franchise policy, can earn points for completing training and demonstrating proficiency in skills such as preparing coffee drinks at the beverage station. These points can be accumulated and then traded in for gift cards, T-shirts, or larger items such as an iPod or digital picture frame.
Hudson Trail uses an external training vendor, 3point5 of Salt Lake City, to reward employees for completing training modules, on store time, with merchandise discounts on gear sold to the employee for 10 percent to 20 percent below wholesale prices. The vendor provides online training on nearly all brands in the stores. Only employees who complete the modules receive merchandise discounts. The amount of training—which focuses on the features of a brand of backpack or how to size a brand of skis, for instance—varies, although discounts typically get awarded after completion of two to four modules.
In addition, Hudson Trail hosts roughly 30 product training clinics, conducted by vendors, each year; 25 employees attend each of these paid training events. Invitations to the events are distributed to employees who have demonstrated high sales performance and taken other training.
There are two other components of Hudson Trail’s training incentive program. The second component consists of a Mountaineer Program on category training that is not brand-specific, such as how to size backpacks, fit shoes and size bicycles. The rewards for completing this type of training consist of recognition primarily in the form of pins employees receive in front of their peers and wear on their aprons. “The higher our outfitters go in the Mountaineer Program, the more likely they are to receive a promotion,” says Cohan, who explains that salary increases and promotions are based on sales performance, customer service and training.
Hudson Trail’s third training component consists of VIP Nights. A limited number of tickets, usually around 40, are handed to select employees who attend gatherings sponsored by vendors that feature food and drinks, raffle prizes, games, slideshows, and other presentations.
Although manufacturers pick up most of the cost of the VIP Nights and the brand-specific module training, training is a sizable expense for Hudson Trail. Cohan estimates that training costs equal 8 percent to 10 percent of the payroll budget.
“Training is a large investment, but I wouldn’t feel comfortable completing a sales budget without knowing what the training budget is,” Cohan reflects, noting that Hudson Trail’s training incentives deliver an attractive return on investment.
Training incentives do not need to be expensive, however. At BookPeople, an independent bookseller in Austin, Texas, Chief Executive Officer Steve Bercu acknowledges that his company’s training incentives are relatively minor, but he emphasizes that the incentives work. The single-store company provides employees with paid trips to industry events, where they learn about the latest books, genres and industry trends. Bercu emphasizes that these incentives are culturally appropriate, as BookPeople’s culture emphasizes knowledge acquisition.
Training incentive tips
In addition to aligning incentives with training and compensation, the following practices can improve the value retail and other industries derive from their programs.
Use incentives for higher-value and more-complex training. The use of incentives for completion of training should focus on training opportunities that increase the value of the individual to the company, Briggs explains. Incentives, then, should not be used for orientation or basic policy and procedure training.
Instead, Briggs says, incentives are most effective when they are applied to training that requires a high level of effort by the individual. This effort may stem from the time required for classroom learning or at-home study. It may also stem from the complexity of training such as product-specific learning, which sharpens the employee’s ability to compare products for a customer or find a product that best suits a customer’s needs.
Reward and recognize. In addition to offering incentives to employees who demonstrate product and service knowledge, organizations should recognize these achievements. Dunkin’ Brands publishes in its newsletter the names of restaurant employees who have earned training incentives, for example.
“When employees accomplish key training milestones and earn incentives, recognize them in a public setting,” advises Hudson Trail’s Cohan. Doing so helps build an organizational culture that values and rewards learning. This type of recognition helps with retention. A March 2012 Globoforce survey of 653 U.S. employees at companies with staffs of 500 or more people found that 55 percent of workers would leave their jobs for a company that clearly recognizes their efforts and contributions.
Keep it short. Cohan cautions against lengthy training incentive programs because their impact can get lost. “I’d rather conduct four training programs [with incentives] that last one month than do one that lasts four months,” he says.
Schlueter agrees. “Don’t over-engineer the program,” she advises, “especially in retail stores and restaurants where there is so much noise every day that it is difficult for employees to carve out time for training.”
Measure carefully. The value of product and service knowledge depends on the degree to which it helps increase sales, customer satisfaction or related business outcomes. When training and HR managers evaluate the effectiveness of training incentives, they should keep this in mind. Rossi cautions against check-the-box measures such as number of courses completed. Instead, he says, managers who use these incentives should test in person the knowledge an employee gains.
When Almeda worked for Staples, he made sure that store managers did not measure training courses or activities completed by individuals. Instead, the company dispensed incentives based on a combination of factors, including training by category, training at the store level, store sales and store-level customer satisfaction.
“The mere completion of a program should not suffice” for the award of a training incentive, Briggs agrees. “Instead, the ability to demonstrate the application of the training, or completion of some sort of exam or certification, should be considered.” For example, mastery or fluency in training could be determined when a recently trained employee conducts a product review with co-workers or the store manager.
Involve employees in the selection of incentives. Whether the options include gift cards, merchandise or other noncash-based rewards, each worker should get the opportunity to select items with personal meaning. Such choices make the difference in terms of engagement, according to Schlueter.
Dunkin’ Brands involves store managers and employees in the selection of training incentives, Schlueter reports, adding that this represents one benefit of conducting training activities in person. “A lot of our training is face to face,” she says, “and that gives us the opportunity to know our people and to understand better what motivates them. We create incentive programs based on that knowledge.”
The most effective training incentive programs are based on strategic business objectives and a grasp of organizational culture. Such programs help HR, training and sales managers ensure that employees are rewarded for expanding their knowledge and for doing so in a way that helps them sell to and satisfy customers.
Eric Krell is a business writer based in Austin, Texas, who covers human resource, financial and social marketing issues.
©2013 SHRM. All rights reserved.
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Strong Q4 for Fortune Brands Home & Security
Deerfield, Ill.-based Fortune Brands Home & Security, a home and security products company, posted 8% sales growth in the fourth quarter.
"We grew both sales and profit slightly more than expected this quarter,” said Chris Klein, CEO of Fortune Brands Home & Security. “And we again outperformed our market, which was driven by double-digit growth in new housing construction and moderate growth for home repairs and remodeling, despite a continued lag in purchases of large ticket items, such as cabinets and windows.”
For the fourth quarter of 2012, net sales were $948 million, an increase of 8% over the fourth quarter of 2011. Operating income was $7.5 million, compared with a loss of $109.4 million in the prior year.
The company’s brands include Master Lock, MasterBrand cabinets, Moen faucets, Simonton windows and Therma-Tru entry door systems. For each segment in the fourth quarter of 2012, compared with the prior-year quarter:
Kitchen & Bath Cabinetry net sales were up 12%, with operating income before charges/gains of $12.3 million versus a loss of $3.1 million. Growth and share gains were driven by product line expansion and overall market improvement, particularly in new construction, with increases in all channels.
Plumbing & Accessories net sales were up 15%, with increases in all channels. Strong gains continued in U.S. wholesale from new construction and international markets, especially China. New product introductions drove retail channel increases.
Advanced Material Windows & Door Systems net sales were up 1%, with Door sales increasing 5% and Windows declining 2%.
Security & Storage net sales were down 4%. Excluding the impact of a 53rd week in 2011, segment sales were flat, with Security sales increasing 4% and Storage sales declining 5%.
For the full year 2012, net sales were $3.6 billion, an increase of 8% over 2011. Full-year operating income was $162 million, an increase of $177 million from the prior year.
“In 2013, we expect the home products market to improve much like 2012, and I am confident that we should outperform our market in similar form, delivering solid sales and profit growth” Klein said.
Sherwin-Williams reports new sales record
Cleveland-based paint giant Sherwin-Williams described a strong performance in 2012 and posted record sales of $9.53 billion for 2012, an increase of 8.8%.
For the fourth quarter, sales increased 7.3% to $2.22 billion, primarily due to higher paint sales volume in the Paint Stores Group and selling price increases.
Net sales in the Paint Stores Group increased 13.2% to $5.41 billion in the year and increased 9.8% to $1.25 billion in the quarter.
Christopher Connor, chairman and CEO, described an all-around strong performance in 2012. "We are pleased to report record highs for multiple financial measures in 2012, including sales, earnings per share, net operating cash and earnings before interest, taxes, depreciation and amortization," he said. "All of our operating segments contributed to the record year with increases in sales and operating profit, lead by our Paint Stores Group."
Total net income for the quarter was $117.2 million, up 34.5% from the previous year’s quarter. For the full year, net income rose 33.1% to $987.3 million.