Improving Contact Center Performance with Contract Incentives: Dos and Don’ts

May 1, 2014

“In business, words are words, explanations are explanations, promises are promises, but only performance is reality.” Harold S. Geneen

Young call center staff working in modern open office

As government contact center managers, we dream of having contact center contractors who regularly exceed our performance expectations. One way to motivate your contractor to excel is by including financial incentives/disincentives directly into your contact center contract.

The concept for incentives/disincentives is a simple one—pay more when your contractor over performs; pay less when your contractor under performs. What’s simple in theory, however, is not as simple to plan, implement, and manage.

What do the experts say? Let’s start with the Office of Management and Budget (OMB)

OMB’s A Guide to Best Practices for Performance Based Contracting encourages us to use incentives by incorporating them thoughtfully into our contracts:

  • Incentives should be used when they will induce better quality performance and may be either positive, negative, or a combination of both.
  • They should be applied selectively to motivate contractor efforts that might not otherwise be emphasized, and to discourage inefficiency.
  • Incentives should apply to the most important aspects of the work, rather than every individual task.

More experts—What do Government Contact Center Managers say?

I met with several federal contact center managers from the Government Contact Center Council (G3C) to learn from their experiences. Each had used or is currently using incentives/disincentives in their contact center contract. Some of the managers loved incentives/disincentives; some didn’t. But ALL agreed on these tips:


  • Do have an attorney review all of the incentives/incentives before you include them in a contract.
  • Do make it an all or nothing proposition. The contractor must meet all Key Performance Indicators (KPIs) at a minimum acceptable level to qualify for the incentive. This prevents your contractor from sacrificing some of your KPIs to meet only those KPIs with incentives.
  • Do use past performance as a tool along with incentives/disincentives. Let your contractor know if performance consistently fails to meet standards, that you will record the deficiencies in their past performance. Past Performance Reports can impact future contract awards—this alone can be a powerful motivator.
  • Do make your incentives challenging, yet reasonably attainable. The goal is to reward contractors for outstanding work.
  • Do make sure the incentive structure is valuable to both the government and the contractor.
  • Do make sure the incentives correlate with results. Agencies should avoid rewarding contractors for simply meeting minimum standards of contract performance, and create a proper balance between cost, performance, and schedule incentives.


  • Don’t place incentives on every Key Performance Indicator (KPI), only those that are most important to your program’s success. This is in line with the OMB guidance and makes good business sense. If you focus on everything, you focus on nothing. Placing incentives on every KPI is like highlighting every line of text in a study guide.
  • Don’t place incentives/disincentives on subjective measures. If your KPI or measure is subject to a wide variety of interpretations and subtle nuances, it will be difficult to hold a contractor to that measure, and even more difficult for your contractor to attain that measure.
  • Don’t launch incentives/disincentives at the beginning of a new contract; instead, take a phased approach. Ease the the new incentives/disincentives into the contract as your become more certain of your standard measures for success.
  • Don’t place incentives/disincentives on a Quality Assurance metric until the contractor and the government are nearly 100% calibrated; otherwise, the calibration sessions can become unproductive. If you and your contractor aren’t calibrated, the calibration sessions can become more about meeting the incentivized metric and less about reaching solid agreements on what constitutes a good interaction.
  • Don’t reward your contractor for simply meeting minimum standards performance.

What are your experiences with incentives/disincentives? Leave a comment, or for more more information, contact Carolyn Kaleel.

Learn more about the Government Contact Center Council (G3C).

Take a look at the other Contact Center articles we published in April: