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Incentive programmes for rewarding working capital management best practice really work

Companies world-wide are wasting millions each year through the inefficient use of working capital. An effective total working capital programme requires the involvement of the whole company. The Volvo Group 'Cash for Growth' programme, which has been one of the most successful WCM projects ever, involved all parts of the company. The global task force even developed games to show all levels of staff how the CCC affected all departments and processes. Dell Computers set their regional sales managers DSO targets as well as the normal sales targets.

The latest evidence about the impact of company-wide incentive programmes comes from a recent KPMG survey in which more than 70% of the finance executives surveyed said that incentives were slightly or very important in the success of a working capital initiative. Those companies which tie incentive packages to working capital initiatives appear to be more confident with their expectations of further improvements in working capital performance.

Heineken USA began to offer working capital performance incentives in 2007, after the company took on a significant amount of debt from the purchase of Scottish and Newcastle in 2008. Under the programme, compensation packages for hitting working capital targets were extended beyond the treasury and finance departments. In fact, all departments and individuals within the company who could make an important difference to the supply chain were incorporated. Not only were there significant improvements in working capital management, working capital best practice in the supply chain became ingrained across the company. The ambitious cash targets were met even in though there was a global recession.

Does you have a company-wide working capital best practice incentive programme? If not, why not? When are you going to introduce one?

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