Individual incentive compensation management plans are limited to very quantifiable performance measures
When we talk about incentive compensation management, incentive programs can be split into two major types. The first is a group incentive plan and the second is called an individual incentive program.
The group incentive plan measures how well a group performs on particular goals. And, they maybe – a group, maybe, defined as the company in whole. It maybe defined as a department, or a team. But, there is no money paid, unless, the group does well or achieves its goal.
Essentially, what these plans do is they establish a pool of money, based on how well the group performs. And, then they distribute that money to the individuals within the group many – most of the time based on individual performance.
So, the first strategy for any individual in a group incentive plan is to make sure that the group achieves its goals. And, there are advantages and disadvantages to this type of program.
The second type of incentive compensation management is an individual incentive program. In this particular case, it doesn’t really matter how well the group does whether that’s a company, department or team, whether they hit their goals or not, doesn’t necessarily matter. We’re only concerned here about how well the individual performs against the goals that have been assigned to him or her.
Generally, these are sales people for the most part. Anytime, you have performance that can be measured on virtually a quantitative basis for an individual, again, mostly sales types of individuals, but maybe some other types of workers as well. It’s worth that the probably put in some sort of individual incentive program. But most programs outside of the sales area actually involve group incentive compensation management.
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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