Implementing incentive-based pay for delivery executives: Performance over Pressure

Locus_Blog_Implementing_incentive_based_pay_for_delivery_executives

Come hell or high water, your customer’s delivery always makes its way to the comfort of their home with the help of what are commonly known as delivery executives. These saviors work round the clock, and always turn up on your customer’s doorsteps with sunken eyes and broken smiles, clearly trying to deliver value with their products. A delivery executive is the only physical mediator between a consumer and an e-commerce company, and due to the dawn of consumer experience as the differentiating factor among companies, it is of vital importance to ensure their timely performance.

Companies must improve employee morale by removing exhausting work conditions and implementing the incentive-based pay for delivery executives, so that performance is driven by a need to accomplish and not by rule. 

What does it mean Incentive-based systems?

Incentive-based systems have become the building blocks of successful businesses. However, most delivery executives are usually recruited on the promise of complex incentive schemes that look bright and shiny on the outside, but differs in reality. To evolve the incentive-based pay into a win-win situation for both employer and employee, one must first understand the prevalent system. 

Incentives are supposed to be the motivational tool used to create vigor amongst employees to achieve better results in return for higher compensation. In the supply chain industry, the delivery executives are primarily offered incentives on the number of attempted deliveries, weekend deliveries, number of pickups, and working odd hours (late night or rainy days). Since the income from delivering alone is not enough to make a fair living, most delivery executives opt for the incentive-based pay scheme.

In an ideal case scenario, employees would brace themselves and work within their physical constraints, contributing to the success of the business, whole-heartedly. Here, the business would benefit in terms of added revenue while keeping up employee morale, and the employee would benefit in terms of increased income with the option of flexibility in work. When ill-implemented, these systems equate to forced labor and usually result in overworked and underpaid, disgruntled employees. 

An incentive-based pay system doesn’t always work out when the risks, costs, and benefits are equally distributed across the mechanism. When you expose your employees to a hazardous work environment by compensating for it with monetary reimbursements, that does not create equilibrium on the workforce front. So what does? If incentive-based pay is such a complex system, how could anyone imagine to take down this beast?

Implementing a successful incentive scheme

Burned out and overworked employees, usually the product of a poor pay system, tend to bring down productivity as well as hampering future hire prospects through bad word-of-mouth. To curb this cascading effect, companies must issue policies safeguarding the interests of the employees while catapulting their own business forward.

Such policies include:

  1. Maintain stable base rates for delivery executives.
  2. Equip delivery executives technology solutions like route optimization.
  3. Firm-governed overtime.
  4. Do not disincentivize.
  5. Incentivize based on company objectives.

1. Stable base rates:

Stable base rates for delivery executives

The base rate paid to delivery executives is the company’s fixed rates that they must pay regardless of employee performance (incentive excluded). When companies fluctuate their base rates and force it to fall, they consequentially force their employees into the incentive-based pay scheme. Delivery executives realize they can barely cut it with current base rates, and force themselves to work longer hours and under worse conditions irrespective of their health and safety. This results in exasperated delivery executives who have lost their will to work in said company. On the other hand, the delivery industry is subjected to higher attrition rates than most industries. A fall in the base rate of a company simply results in the employee leaving the company for another. 

2. Equip your employees:

route optimization app for best routes

Smart work over hard work is the new norm, and technological advances are allowing delivery executives to perform the same amount of work without having to put their lives on hold. The progressive field of technology has led to many advances such as route optimization in order to generate the best routes for delivery executives, taking into consideration factors such as driver’s work schedule, the order of stops, types of vehicles in the fleet, traffic, and weather, so that the employee does not waste any effort and only aims for performance achievement. Softwares such as geocoding engines ensure that your delivery executives won’t end up at the wrong address or even waste time hassling customers to send their live locations. 

Even the knowledge of the unavailability of customers at home can help your delivery executives reschedule orders, instead of racing through traffic to an empty home. In the field of logistics, every second saved is money made. In a way, even the choice of optimized routes would act as an incentive to perform, on its own; reaping results through minimal effort. 

3. Firm-Governed Overtime

factoring historical performance

Due to fraudulent activities in the past, a lot of companies have stopped considering the number of hours worked as an incentive factor. For example, if a typical 8-hour shift was worked by delivery executive A, he may slack for those 8 hours and complete his deliveries by working overtime. Although it is wise not to consider this a factor, it would be smart to implement it in a more regulated manner because working overtime plays a key role in setting competitive advantage and bringing in more sales.

The new norm is firm-governed overtime, where the company gets to decide which employees qualify for overtime incentives. Firms can do so based on their discretion while factoring historical performance, complaints, past fraud, customer feedback, etc. 

4. Do Not Disincentivize

Do not Disincentivize the pay

As already mentioned, the attrition rates for the delivery industry is sky-high due to the unending need for delivery executives. Thus, the incentive-based pay system should only offer a way up,  not a way out. Incentives are the way up that employees strive for in order to get ahead. However, disincentives such as cutting pay based on the number of rejects, late deliveries, customer feedback, etc., will most likely lead to the resignation of your employee. The carrot and stick approach does not apply to this industry, so trade that stick in for lots of carrots; you’ll need it.

5. Incentivize Based On Company Objectives

Incentivize Based On Company Objectives

The incentive-based pay system is not an exact science. It varies from company to company depending on what objective they aim to accomplish.

For example, if a company’s focus is to improve customer satisfaction, its primary incentive factor will be customer-provided ratings. However, if raking in the big bucks is the objective, then the major factor will be the number of successful deliveries. Therefore, companies must tweak their schemes with elements that best suit their business needs. Adopting an already-in-place scheme will do nothing but harm if it does not match company objectives. 

It’s clear that when improperly implemented, the incentive-based pay could land the company in a very sticky situation, but once implemented with proper measures in place, it could be the glue that holds your company together. 

Locus is solving complex logistics decision-making problems for some of the biggest brands in Southeast Asia. To know more, get in touch with us.