Determing How To Spend Your Budget

Previous posts in this category discussed developing the appropriate budget based on the goals desired and also addressed what to focus on - system, process, people, etc.  Once you've determined your outcome, dollarized it and decided it is something that an incentive will help with, you need to determine who will be the focus of the program.

One of the first things to do is look at the available audiences - all the audiences that potentially could help achieve your objective.  For each audience determine which behaviors they will need to change, improve or adopt.

Once you've created this "audience behavior map" do a quick allocation exercise.  Divide your available budget by your audience and determine if there is enough budget to influence their behavior.  A very simplistic look at this allocation is represented in the chart below.

In this example, you could theoretically spend your entire budget influencing one person.  Or you could spend $100 on each of 100 people. 

Once you have your allocation by audience compare that to your behavior map and see if the allocation is in proportion to the effort you identified.  There are some anecdotal rules such as an incentive should represent 3-5% of the income the audience would earn during the time the incentive is operating in order to influence behavior. 

As a professional in the industry I can say that this "seems" to be appropriate but I have no hard evidence to prove this is right (if someone has evidence please send it to me!)  Some will say the shorter the program the more the award should skew toward the high end (5%) and the longer the program the more it should skew to the low end (3%.)  Again, it intuitively makes sense but I have no specific study to prove this relationship.  The easiest thing to do is validate the allocation by talking to someone in the audience and get some feedback.  Obviously, the person you check with will probably try to inflate the award value relative to the effort in order to influence you to provide a high award for the work.  What you're really looking for is the "you've got to be kidding" response.  You want to place the award somewhere between the absurd at the low end and absurd at the high end.

This process will help determine the who, the behavior and the award value. 

There are many, many ways to structure the incentive to distribute the award and that will be the focus of the next post.