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Incentives Work!

Much that is right or wrong in the world can be traced to incentives or the lack thereof.

Much that is right and much that is wrong in the world can be explained by incentives. This is true on a global geopolitical level, and it’s true in your contracting business.

The Purity of the Profit Motive
The capitalist economic system is built on incentives.  When each of us acts in our self-interest we end up serving our fellow man efficiently.  Companies do not prosper by doing shoddy work and cheating people – at least they do not prosper for long.  The marketplace, which rewards good service, punishes bad service.  Companies prosper in direct proportion to their efficient service to others.

Some in the media see profit as a dirty word. It is not dirty. It is clean and pure. It is the absence of profit that is dirty. Governments and non-profits are not purer or more noble than profit seeking enterprises because they purported abstain from profits. It merely means they operate according to a different set of incentives, which are not always apparent. Hidden incentives can be nefarious. The lust for power and control leads to the forced restriction of individual rights and freedoms.  

Governments coerce. For profit business enterprises persuade. Who do you prefer to deal with?

All Behavior Can Be Explained by Incentives
What works at the macro level, also works for individuals.  Management guru, Michael Le Boeuf said, “The greatest management principle in the world is: ‘the things that get rewarded and appreciated get done.”

Le Boeuf is exactly right. The challenge for you, as a business leader is determining the appropriate rewards. Figure out what customers really want, deliver it, and your business will be rewarded. This is the way the system works.  Reward your customers and they will reward you!

It is not limited to customers. Everyone in your company responds to incentives and rewards. It is the leader’s job to figure them out.

What Drives Your Customers?
Think about the person who buys from your company.  Do men or women buy most often? Most contractors say women. The marketing research backs this up. So, describe her. What is her life like? What does she do all day? All week? What stresses her?  What does she want from the world?

How does your company fit into her world?  It is not as simple as thinking about her life when the air conditioning breaks down and it is 95 degrees outside, though that is part of it. How does your company fit in terms of maintenance?  What about replacements?

What can you do for your customer that will make her life better? What can you do that is different from every other HVAC company in town? What will incent her to call your company and not another when there is a breakdown?  What will incent her to get maintenance performed? What will incent her to replace a working air conditioner? What will incent her to have the various system enhancements you offer, added to her system?

What Drives Your Team?
Everyone who works for you is at least partly motivated by money.  Otherwise, they would be volunteers.  And yet, not everyone shares the same money motivation.  Some long for recognition.  Some of the most money hungry salespeople really crave the recognition that comes from being the best.  Money is just a way of keeping score.

Some people need money, but really, they just want to do a good job in an enjoyable atmosphere and be appreciated for the work they do. For some, a day off matters more than an extra day’s pay.

If you understand what drives your people, you can incent them individually in ways that are important to them personally. Some contractors encourage everyone on their teams to create vision boards, which are small bulletin boards with images (printed from the Internet or cut out of magazines) of things they desire. The boards are displayed in the shop and help management understand what is important to different individuals.

Do not ignore team incentives. If you want your team to work together, include team goals and incentives for everyone to pull together. 

Beware Unintended Consequences
It is important for you to think carefully about how an incentive might result in less desirable behaviors.  This applies to your team and also to your customers.  Just remember, incentives work!  All behavior can be explained by incentives. To learn more about incentives?  How about mixing with the most successful contractors in the world?  Come to Service World Expo October 16 – 18 in Las Vegas.  This is the industry’s best conference and show for residential contractors.  Learn more at

Engage with the nation’s most successful HVAC contractors: join the Service Roundtable, at