Incentives matter: Motivating staff is a necessity not a luxury

Richard Farleigh
THE villa, or riad, that I rented with friends and family in Morocco was luxurious and expensive. Beautifully decorated with a lovely garden. It came with staff, including a young guy, Yassim, whose job was to take care of our needs. It was a perfect holiday – except for him.

Eventually I decided we needed to chat. “Yassim, you’re a nice guy. You’re always smiling and happy, but I have to say you don’t seem to care. You never seem to be around when we need you, you’ve given us bad advice and you’ve messed up arrangements. I don’t understand”. He answered honestly: “I know you’re right. It’s just that the boss doesn’t pay me very much, so I think, why should I try too hard?”

Yassim was missing a trick. “What you’re forgetting is the fantastic opportunity you have. You’re meeting lots of well-off foreigners. Sooner or later one of them will do something here like build their own riad, buy a hotel or start a business. If you have impressed them it wouldn’t be surprising if they hired you for their new venture and you landed a dream job. Your friends would think you were lucky, but I wouldn’t. I would think you’ve made your own luck; you’ve realised that foreign contacts here are an asset and you’ve impressed, even when you don’t know where the reward will come from.” At least I made him think, and for the rest of our stay he was spot on.

Motivating staff can be tricky, but it’s obviously very important for all businesses. It is commonly said that two things drive the financial markets: fear and greed. I learnt that kids basically respond to the same two influences: threats and bribes. And employees are much the same. On the downside, they are usually aware of the risk that if they don’t do their job reasonably well, they’ll lose it. On the upside, they get paid, which is simple enough. But there are many other ways to reward them.

Providing good working conditions such as flexible hours, the ability to work from home, help with childcare, transport and even providing lunch makes for happier and harder working staff.

It can also help to make people feel important. I noticed once that a bank teller in the US had the rather inflated title of vice president, which I thought was silly until I noticed how happy my own staff were when given the title of manager. Simple, just give their boss the title of senior manager.

On the financial side, giving staff equity in the business can be very effective. The problem, however, especially with small companies, is that there is often no market for the shares and they can’t be cashed in. Or that the shares fall in value, as happened in the tech-wreck.

For that reason, bonuses linked to performance can work wonderfully, provided of course, performance is measured properly (City of London, please take note). The simplest is to calculate bonuses as a per cent of profits or sales, and pay them in cash yearly. You don’t want to under-reward your staff – just ask Yassim.

Since the mid-1990s Richard Farleigh has operated as a business angel, backing more early-stage companies than anyone else in the United Kingdom.