Frequently Asked Questions About an Incentive Compensation Plan

An Incentive Compensation Plan Reflects Team Effort

This team incentive compensation plan is unfair. I did great but all those slackers on my team caused me to lose out.

The company is tied at the hip here a little bit. If you’re going to have these kind of incentives, they need to be relatively general.

The wonderful part of that is that it gives each of those people in that room reason to look at the person across the way and say, “Can I help you? What do you need me to do to pull your part of the bargain here so that we all can benefit from this” The wonderful thing about team incentives is it encourages global or team success.

I didn’t get my bonus because there is no way I could influence results. Why did you set the incentive compensation plan up that way?

Well, some bonuses are kind of a reflection of team effort. And some of the better bonuses are actually a reflection of team effort.

Normally, the people that are in the bonus categories are in high enough positions that they’re supposed to be able to influence results. And if you’re in the bonus but you’re in a position you can’t influence results, you ought to count your lucky stars that you’re in the bonus because normally, most market based bonuses are for people who are in high enough level jobs that they can influence the business in relatively general way.

There’s some explanation that a good HR person could offer based on your incentive compensation plan. It depends on what your scheme is about.

Why did I only get 80% of my bonus instead of the whole thing?

Well, there’s normally a formula for an incentive compensation plan. And so, there’s some formulaic explanation of that. And it should be very simple to explain.

It depends on the formula being used, but on one of the dimensions, you probably didn’t cap out. And it may be a collective one of the organization or maybe one in your individual area or your group area. But you’d have to look at the formula to tell.

Edited Remarks from “How to Drain the Drama from Salary Reviews: A Conversation Roadmap” by Gary Markle