An Employee Incentive Program Must Motivate Employees

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

Determine what’s important and tailor your employee incentive program to that

So, let’s talk specifically about incentive philosophy and principles in an employee incentive program. In the simplest sense, you have to figure out what motivates. And that’s not necessarily an easy thing to determine. And there’s not a lot of empirical research to guide you. But this is what you have to do in order to motivate employees.

Find out what your people want from an employee incentive program
You have to determine what’s important to a person in your employee incentive program. And that actually may vary from person to person. Some people think benefits are more important than salary for example or cash is not quite that important to some people. And some people it is the most important thing.

But once you determine what’s important to a person, you have to offer and exchange for some desired behavior. You do this for me and I’ll do this for you.

In fact, you can literally take this back to caveman days. It’s the same kind of principle. They traded what was fair. And, in this case, we’re trading cash for services. It doesn’t necessarily always have to be cash though.

The more you can measure individual performance, the more likely the incentive plan will succeed, and the more money you can target for incentive. Meaning that if possible, what you want to end up with is quantitative measures of one sort or another.

Again, you’re able to specify in real specific terms exactly what you want an individual to do. In fact, it has numerical qualities about the whole thing. You do this for me and I’ll do this for you. So, it leaves no room for interpreting what’s the expectation is for performance. There may be parts of jobs that can be measured quantitatively, but, for the most part, you’ll have to use probably some subjective performance measures for most jobs, unless, you’re talking about, probably, sales jobs. The more you can measure individual performance and be accurate about it or quantify it the more you can probably feel safe about targeting for incentives for these group of people.

The more money you put at-risk for an individual, the more you will attract, retain and motivate more aggressive risk-taking behavior. Another term is called leverage, which means that the incentive portion is the at-risk portion of total compensation. It could be expressed as a percent of salary, 20% of salary, 30% of salary, etc. In some cases, that’s good. In other cases, that may not be quite so good.

What you measure and pay for is what you get. This is a true lesson in compensation. So, if you measure and pay for a teamwork quality, quantity of work, relationships with customers, whatever those performance measures may be and you pay on it, that’s what you will get in the future.

Realize that whatever could happen in an employee incentive program will happen. There is no perfect incentive plan. Everyone has certain weaknesses. It’s a matter of balancing a lot of different variables in order to come up with a new employee incentive program that’s best for you.

However, even if you try to anticipate the problems with an incentive plan given certain scenarios that could happen, you’re not going to get all of them. So, you probably want to leave yourself some discretion or some flexibility in order to make the kind of management calls you have to make as you move through administering the employee incentive program.

Win-win situations are achievable. In almost every employee incentive program, you can develop a win-win situation where employees can win and the company can win. It’s not necessarily a zero-sum gain. You need to be a bit creative about the whole thing.

Finally, those who have the most influence over the planned goals should have the most at-risk. Meaning that whatever the goals are for the individual or for a group and we’ll talk about the difference is between individual and group plans. The more influence someone may have over the goals that are established should have the most at-risk.

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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