Employees who perform well should naturally receive more than their lower performing associates, right? An effective performance related pay (PRP) scheme should deliver benefits to both employer and employee since it is driven off the employee’s ability to earn extra for more effective performance in their job. It sounds intuitively right in theory, it looks good on paper, but the implementation of such schemes has proven highly problematic.

What is a PRP scheme?

The essential feature of a PRP (aka ‘appraisal related pay’, ‘pay for performance, ‘merit based pay’) scheme is that increases in pay are wholly or partially based on an appraisal of an individual’s performance against pre-agreed targets. This differentiates them from other productivity based systems such as payment by results or piece work.

In most cases the bonus paid is a percentage of the annual salary to be paid out on top of regular salary the following year. Employee and manager will generally meet at the beginning of the year to set the goals and objectives that must be achieved. They will sit down again at the end of the year to determine whether the objectives have been met and if the bonus has been earned.  

Issues with PRP schemes

While there is widespread acceptance that the concept  is right in principle, human nature is such that putting this into practice can open a can of worms. It can be viewed as introducing inequalities in pay level and give rise to fear and jealousy among employees over how they might fare under the new system.

PRP has also raised resistance from some employee associations who view such schemes as an individualized method of payment running counter to the principles of collective bargaining. These objections will best be overcome if, through negotiation and/or consultation, employee associations have an opportunity to work with management in developing the details of the scheme so as to reassure themselves that the process will be fair to their members and deliver clearly demonstrated benefits to them.

The concept of fairness is pivotal to a PRP scheme. Because they are based on appraisal of the individual employee, often by their line manager, they are open to the perception that bias and personal favoritism can influence the result of pay reviews. PRP may also fall foul to the belief that pay is not related to performance, but to having the ‘right’ contacts and an ingratiating attitude.

The primary goal of a PRP scheme is to improve performance but ironically, PRP schemes can backfire by engendering self serving behaviors that lead to long term decreases in productivity. For example, a focus on short termism or an unwillingness to work as an active team member because they are too interested in pushing their own barrow to achieve their individual PRP award for the year. The aim should be to create a set of assessment criteria that promote both hard and soft behaviors in the context of both individual and team achievement.

Performance can be difficult to measure. In some industries like sales, job performance is easy to quantify through quotas and sales revenue. When it comes to nurses and teachers it is not so simple. The fact that in some jobs the critical skills can be difficult to identify and even harder to quantify at times makes PRP a questionable reward methodology 

Performance appraisal – the bedrock of a performance related pay scheme

For a PRP scheme to succeed effective arrangements must first be in place to define, measure, appraise and manage performance.

A performance appraisal system in itself is of benefit to a business allowing it to objectively identify the strengths and weakness of its employees, highlighting training needs and assessing promotion potential. It is fully appropriate, and makes good business sense, to introduce an appraisal system for its own sake. Should it be decided subsequently to introduce a PRP scheme the performance appraisal system provides the perfect platform from which to launch - teething problems to do with the appraisal process itself will have been resolved and the effectiveness of the appraisal criteria already gauged.

The focus of a PRP scheme should be on encouraging high performance through an effective performance management and appraisal systems first – and only then on pay as an incentive to help achieve that goal.

Using the services available over the Internet means that over time you will accumulate vast numbers of cookies and ‘temporary’ internet files and will be exposed to a range of nasties including all sorts of malware that will reduce the speed of your computer or bring it to a halt altogether. The tips below will keep your computer safe while web surfing and preserve its speed.

Enable Windows updates (DIY safe)

When your PC is equipped with the most recent updates from Windows it is much less likely to suffer security breaches. The best way to ensure that you have the latest security updates (aka ‘patches’) is to enable automatic Windows updates on your computer using the Automatic Update utility.

Delete temporary internet files (DIY safe)

When you visit a website your browser adds a file to the computer’s hard disk in which it stores data about every page or URL address you view. The next time you visit the same website the browser will take the data from the Temporary Internet File first while only content added to the page since your last visit needs to be downloaded. This allows the page to display quickly in the browser without waiting for a response from the website's server all over again. If your internet connection is unavailable you can view the cached version of the webpage while offline.  However, the name Temporary Internet File is actually a bit misleading in that the files are not really temporary. They will stay on your hard drive until you purge them and the buildup of data in the cache will gradually slow the processor down (there is a privacy issue also – anyone who checks the cache can see which websites you have visited). Eventually, the cache can take up a significant proportion of hard disk space. Browsers that use a Temporary Internet File cache have methods for deleting these files using the Internet Options utility. Don’t rely on running the Disk Cleanup tool for this job – it will delete only files, not cookies or shortcuts in the cache.

Change the browser history options (DIY safe)

The browser maintains a running list of the links to websites you have visited, its History function. One way to save on memory is to change how many days the computer saves this record of visited webpages. By saving these pages for a smaller number of days you can clear out more of your PC's memory.

Protect against malware (DIY safe)

Malware is the coverall term for all the nasties that exist in the world of cyberspace – viruses, Trojans, some types of adware, spyware et al. Their intent may range from being simply annoying (shoving an ad in your face) to being totally malicious (stealing your credit card details and other forms of identity theft) but, regardless of intent, the malicious files and registry entries they introduce will eventually erode the computer’s performance if not prevent it functioning altogether. Installing and keeping up to date on your anti-virus/anti-spyware utility is one of the most important things you can do to extend your computer’s life and safeguard its performance. You can purchase software such as Norton AntiVirus or Spyware Doctor, or free software such as Spybot - Search and Destroy. Set it up to scan automatically at least once a week but preferably daily.

Delete useless cookies (DIY safe)

Cookies are pieces of text that the web server at the site you are visiting sends back to your computer and that get stored on your hard drive. Cookies serve a legitimate purpose (saving login information to cut down on what you have to enter, remembering your name and preferences to provide a more personal experience at the site for instance) and do not invade privacy, pose a threat to the security of information or to the functioning of your computer.

Nevertheless, they add up and should be managed periodically. Get in the habit of reviewing the cookies accumulating in the browser and deleting unnecessary ones. Your browser will have a tool for doing a universal cookie delete but this will remove the useful with the unnecessary. They can be checked individually by going to the Cookies folder and deleting particular ones – not too time consuming if done regularly.

Many types of small business routinely offer customers some idea (either a quote – which is legally binding, or an estimate, which is not) of the cost for doing a job. Often customers require such an estimate for a sense of safety or to compare quotes from different businesses before they will commit to a purchase. There’s always the pressure to supply the lowest quote to win the job so an inaccurate quote can wipe out any profit margin on a job. Better understanding how to price and more efficient ways of developing quotes can reduce the risk of getting it wrong.

Know what you are quoting on

It is imperative that you scope out the extent of the work in detail before providing a quote.

Protect your profit - predict the cost of the job accurately

If you aren’t able to tell whether you are making money on your jobs you are going to end up with financial difficulties. Running a business that produces a predictable profit means accepting the nuisances associated with collecting and analyzing job cost data. Developing a job costing system will be more or less difficult to get right depending on the type and size of jobs you perform. However, developing one that provides you with accurate costs to put into your quotes is essential to survival. It may be as simple as quoting the standard market rate for your labor or for someone with your level of expertise and the type of service you offer. Frequently it will be more complicated and include estimates for the cost of labor, of materials, of transportation, for hiring special equipment and so on. The first step is to identify all the direct inputs and have accurate information on their cost ready at hand.

Other input costs are harder to identify and estimate – what about the cost of the advertisements you placed in the Yellow Pages? Or vehicle maintenance costs? Or the office photocopier you use to prepare documents? You can’t recover those as items on the quote but you do need to have an accurate idea of your overheads so you can factor a percentage into your quote to cover them. For difficult-to-quote-for jobs, for example repair work where the cause of a problem can’t even be identified before some preliminary work, a 'time and materials' quote (the time and materials it takes to finish the job) might be better than a fixed price approach.

It can be enlightening to look at how others in the trade prepare their quotes for similar jobs. Some industries and industry bodies have created pro-forma documents such as the standard domestic building contract. Accounting programs such as Intuit's QuickBooks include easy-to-use features that track all your costs and allow you to do job costing and quoting based on time, materials and overheads so you don't have to worry about having to track it all manually.

Cover all costs and conditions attached to the quote/estimate

Omitting costs and conditions from a quote can create legal problems, not to mention whittle back your margin on the job. Specify the products and services you are selling/providing to the customer; what those items will cost; the delivery date of the proposed transaction; any discount offered; shipping information and payment terms etc. Provide an expiration date to define the time period for which the terms of the quote are valid since costs are likely to increase over time, some materials may become unavailable or other contingencies preclude meeting the quote conditions as specified.

Work smart – save time and money preparing quotes

Avoid working out quotes on scraps of paper. There are a number of good industry specific quote development products on the market while standard business software packages such as Microsoft’s Office Accounting Express 2008 include quote creation modules. These include all the necessary items and options you need to prepare a quote and get the math correct. If you have the customer’s email address you can then send it out at the touch of a button.

In this world it may seem that change is the only constant – but there is one other thing that appears to right up there with change – the attractiveness of coupons to consumers.

Coupons have always been popular but since they became available electronically their use has exploded. Emails that provide a printable coupon for in-store redemption, banner ads that offer discounts to new customers, onsite coupons for immediate discounts on online purchases and even coupons delivered via text messaging to cell phones are among the most popular forms of electronic distribution.  And the great thing is that they are working better than ever. Consumers hurting from the economic downturn are increasingly turning to online coupon offers to slim their spending. They’re economical marketing for your business too - no postal cost and any printing cost is borne by the user (who prints the coupons) rather than the issuing business.

There are two prongs to an online coupon marketing strategy. Put coupons on your own site of course. But also submit them to some of the myriad coupon aggregator sites that have sprung up in recent years to display in one place the thousands of coupon deals on offer. Coupons.com, a site that allows consumers to select and print coupons that can be redeemed at stores offline, had 8.5 million visitors in November 2008 alone. Focus on submitting your coupons for listing on some of the product/industry specific sites first, then on these general directories. These sites are easily found using terms such as ‘your industry sector name’ plus ‘coupons’ or ‘coupon site’ in your search engine.

Good for more than just immediate discounts

While coupons most commonly offer a discount on the immediate purchase they can be used to encourage repeat shopping by making the discount available on the next sale.

Getting the most from online coupons

If your shopping cart doesn’t already support coupon purchases get it modified (or buy a cart system that does). Offer the code on the page the consumer is purchasing the item from so that they can enter it at checkout.

Customers who might otherwise be wary of supplying their email address to receive your promotions may well feel comfortable about providing it in exchange for a coupon code and more inclined to allow you to add them to your email permissions list to receive future offers. New customers can be asked to create an account before they can make a purchase and their email can be part of the information gathered. If they are that interested they are likely to respond favorably to an offer to receive email notification of future offers. You can also use a coupon offer to get current customers to market on your behalf. An offer delivered by email that contains a printable coupon for 25% off for friends and family will quickly be forwarded to those people giving you access to a previously unreachable bunch of prospects. When you do send emails with a coupon offer in future, include the words ‘coupon offer’ or something similar in the subject line. Knowing there is a coupon offer increases the opening rate considerably.

Consumers love coupons

Many people, in any economy, simply love hunting for bargains. When financially strapped consumers using internet shopping to stretch their budget join the parade, the benefits for the small businesses are considerable. What’s more, coupons represent a truly affordable and effective marketing strategy. If you're not using coupons in your marketing mix, you're definitely leaving money on the table.

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