- Blog post
Individual ‘Line of Sight’ Performance in Group Employee Incentive Plans
How much influence can one really have over goals in employee incentive plans.
Some of the advantages of a group pay for performance plan are that it’s much easier to measure in a quantitative fashion how well a group does as opposed to an individual
With group employee incentive plans, employees are rewarded for a collective performance. How well a company does, a department or a team does. If, that group does not perform well, no bonuses are paid. The group performance may be things like: profits, revenues, profit margins, market shares. These are all quantitative kinds of things.
Once bonuses are generated, and the group performed or achieved its goal, there are different ways of allocating that money to individuals.
Equal incentive payments can be done. “Okay, here’s the pool. We’ve got ten people. Everybody gets 1/10 of the pool.”
You can also differ the payments based on the contribution to goals, which requires you to actually measure what the contributions really were for the group or what the performance was relative to achieving the group goals. And differ those payments based on who contributed the most.
And, finally, you can also differentiate these payments based on base salaries. Those who make the most get more even in a normal situation, even if all things are considered equal in group employee incentive plans.
One of the advantages of employee incentive plans and you may have a culture in your own organization about teamwork. Groups support teamwork. In order for anybody to get paid, you should do whatever it takes to make sure that the group achieves its goal. Whether it’s on your job description or not, you should bend over backward to make sure first of all the group achieves it’s awards. And that you’ve contributed in that process.
And, it increases participation and decision making because the – how money is distributed to individuals is not necessarily quantitative. And, I do see groups – companies try to make a very quantitative formula driven process in order to determine who gets what part of the group employee incentive plans.
When you boil everything down, probably, the person, who is best able to make that call, given all the variables for individual performance is probably the manager. But, the manager should, if everything works correctly, be talking to other people and eventually they’ve got to submit their recommendations to their bosses. And their bosses have to compare to that other bosses, et cetera. And it increases to who has the say and how much is paid to an individual.
One of the disadvantages is that there’s a lessening of what’s called line of sight. Line of sight meaning how close are those goals or how much influence can I really have over those goals.
Somebody low in the organization within a group plan, a company wide program may have less opportunity to influence the group performance measures, which may be some things, if it’s a company wide program like, revenue and profitability. The higher you are in the organization, the greater that line of sight is.
If you’re wrestling on how to figure how to measure an individual, chances are, they should be put into group employee incentive plans. And, the group performance can be measured.
Edited Remarks from “Incentive Talk: How to Design an Incentive Plan that Works for – Not Against – Your Company’s Goal” by Rick Olivieri