Difficulties in Employee Incentive Programs

by on June 16, 2009 · 0 Comment POSTED IN: HR Info Center

Many Variables must be Worked into Employee Incentive Programs

Anybody who’s worked at different companies over their career and run across these employee incentive programs, will tell you that no two of them are exactly alike. That’s because there’s so many variables that have to be worked into an employee incentive program that every company kind of decides how they’re going to deal with these variables in a slightly different way.

That’s primarily true of sales compensation programs. But when you’re talking about other types of employee incentive programs, even company wide employee incentive programs, they are generally a little bit different from company to company.

Some of the obstacles that you’re faced with in developing these employee incentive programs involve trying to specify and measure job performance. Measuring job performance for most jobs or most employees is a difficult thing to do. We make an attempt at it using performance appraisal forms in a process.

But anybody who’s dealt with performance appraisal knows that there’s no holy grail for performance appraisal forms and processes too. When we talk about paying per performance, which is what most compensation consultants will tell you is the correct philosophy to have, the compensation people can write formulas until the cows come home about how to pay people based on performance where the weak link in that equation is measuring job performance. Spend sometime on your job performance or your performance appraisal or evaluation system. It’ll pay off for you in the long run.

The second difficulty in doing these employee incentive programs is identifying what’s valued to an individual. Remember, you do this for me, I’ll give you this. But, you have to figure out what’s valued by the individual and that may be different from individual to individual, even if you’re talking about cash. A thousand dollars to one individual may seem like a great reward. And, to another individual, it may be somewhat insulting. Every person has their valued rewards. In some cases, if it’s not cash, it maybe other kinds of things that are most valued by them.

Another difficulty of trying to link these two together – What the rewards are and what the job performance is. There are lots of ways that can be done. And again, there is no holy grail for this. A lot of it, the compensation people like to think, talk about compensation as part science and part art, that’s very true. And, a lot of the artwork comes in these employee incentive programs.

Edited Remarks from “Incentive Talk: How to Design an Incentive Plan that Works for – Not Against – Your Company’s Goal” by Rick Olivieri

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