Unlocking growth with incentives and equity: The Indigo Paints story

Creating innovative products that improve the lives of your target customer is the core of an enduring brand – but sales is the engine for growth. The way Indigo Paints structured their ESOP and incentive plans to empower their sales team is a masterclass in the power of motivation. Sakshi Chopra talks with Indigo Paints founder Hemant Jalan about how the company unlocked growth by turning employees into owners and rewarding hard work with a share of the profit employees help generate.

Sakshi: Indigo Paints has practically zero attrition among its sales team, and one reason is your unique self-directed sales incentive program. Sales team members set their own targets, which is linked to a corresponding bonus, each year. Where did this idea come from?

Hemant: I actually have to thank my branch manager for Kerala, Pradeep MG, for this. I was visiting our Kerala office in in 2007, shortly after Pradeep joined us as an entry level salesperson, for an annual review. He raised his hand during a discussion on targets and goals and asked for a Hero Honda if he crossed 1 crore in sale that year. It seemed a bit wild; the average for most team members was 20 to 30 lakhs in sales per year. I said ‘why not?!’ He hit his target, and when I gave him his keys later that year he asked for a 1 lakh bonus if he could push his sales over 1.5 crores. Again, I thought it was preposterous, but I agreed. When I handed him that 1 lakh cheque the following year, I knew I had to bottle this up and share it with the rest of the company.

In 2009, we held our first annual sales conference and announced a new incentive scheme that put sales people in the driver’s seat. Each team member came up on stage to publicly state their target, and a corresponding bonus would appear on a jumbo screen. The higher the target, the higher the bonus – and it scaled exponentially. People immediately started tweaking their target, and bonus, a couple of times before they locked it in and left the stage.

Sakshi: I remember watching this process happen at your annual sales conference in 2014 – we were totally blown away by what was going on up stage! It was so transparent, and everyone could see what they would get if they hit their personal target – and what other people were aiming for, too. When you launched this in 2009, what kind of impact did this have?

Hemant: Putting this system in place completely changed the trajectory of our company. Indigo Paints instantly went from 15% to 18% in annual revenue growth to over 40% per year. What’s more, attrition went to near zero. High performers couldn’t get this kind of compensation elsewhere.

Sakshi: One of the things we first talked about after we partnered with you in 2014 was putting an ESOP plan in place, to build an enduring organization and team.

Hemant: That’s right – ESOP became one more very powerful tool to attract and incentivize top talent. The first year, we rewarded 30 high performers with equity during our annual sales review, and kept adding more each year. We set up the plan so employees could vest in four years and monetize on every funding found. I remember the first time that happened. We had you and some of the other team from Sequoia India join us on stage at our annual conference to hand out cheques to people who were monetising their vested ESOP! People whose annual fixed salary was in the 10 to 20 lakh range walked away with anywhere from 25 lakhs to 1 crore of wealth, depending on how many of their shares they sold.

Sakshi: Yes, that was incredibly exciting! There was so much excitement and energy in the room!

Hemant: Our team members couldn’t believe it – talk of ESOP hadn’t seemed real for many until this moment. One man from Haryana, who’d sold his home a few years earlier to pay for his daughter’s university fees, bought the house back with his first vesting round. Pradeep built his mother a bungalow. Everyone was galvanized. At each subsequent sales conference, the highest performing team members were awarded equity. It became a virtuous cycle.

The bonus system encouraged performance, and the highest performers were doubly rewarded with a stake in the company. ESOP is now a core part of our incentive package for key employees.

Sakshi: You had a successful IPO in February this year. What did that mean for your employees?

Hemant: A couple dozen people encashed their ESOPs just after the IPO, and many of those received between 1 and 3 crore each. Many team members are hanging on to some or all of their stock with the hope of compounding their wealth as the company continues to grow.

Sakshi: We feel ESOP is a critical tool that should be in the arsenal of every start-up founder. The most important assets in any company are its people, and as you’ve just shared, turning those employees into owners can really power long term growth.

Hemant: Yes, some founders are very hesitant – maybe they’re worried about diluting their stake. But the best way to create wealth is to share it with your employees. One entrepreneur can create 100 more inside their organization – each as driven and passionate as any founder might be about the future of their company.