Take incentive compensation plans to the next level: here's how

by on June 22, 2009 · 0 Comment POSTED IN: HR Info Center

Noncash incentive compensation plans capitalize on the ‘new contract’ with employees

It’s unlikely you’ll be guaranteeing a job for life to your next new hire. And even more jaw-dropping if a sharp young person would want that. The shift away from long-term loyalty is what comp gurus call the “new contract” with today’s workforce: We’ll give you the tools you need to help reach our goals, and if you achieve them we’ll reward you. That’s a big “if.”

New wrinkle
Sure, “pay for performance” has been around the executive suite for years, with cash, stock or other awards linked to achieving company growth targets. But this new wrinkle takes the concept top to bottom, providing cash and noncash incentives, gifts and recognition to employees who meet customer service, quality or safety goals.

Be specific on behaviors
Tie incentive compensation plans to business goals and make sure employees know what behavior is being reinforced. Other keys:

  • Make sure rewards are consistent. If one person gets a $1,000 spot bonus and another gets a movie ticket, that’s sending the wrong message.
  • Give managers flexibility. Let them recognize employees in their own way, with, for example, gift certificates, dinners for two or a day at the spa.
  • Give employees a choice. One-size-fits-all programs aren’t as effective as those that let workers choose from among a variety of alternatives. Example: Do you want logo merchandise, a plaque for your desk, time off or the boss’s parking space?

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