shipping and handling) that we paid.
Business owners and managers are not immune from finding that always trying to get the cheapest deal often turns out to be the most expensive and unsatisfactory in the long run.
Incentives are a classic and very common area where poor planning and unwarranted
assumptions lead to unexpected consequences, with three-aspirin headaches that
could have been avoided by a little additional clear thinking.
What Behaviours do your incentive plans reward?
Do you know?
Incentive plans need to be carefully designed to promote the success of the organization. As long as the money is flowing, an employee expecting a bonus isn't going to ask, "are you sure you want me to do this?" That's not going to happen, and most incentive plans are not self-correcting. Employees will follow the dollar bill with little thought for the bigger picture.
If you haven’t looked at the details of your own plans lately, you should. For many companies, this is an ideal time, when the new year is approaching and new goals are being set for 2014. Does your incentive plan reward the right kind of measurements that support the company's wider objectives? Does your plan reward employee behaviours and results that help to deliver business success? Do you expect – and do you measure - a Return on Investment (ROI) for the incentive money you've targeted for
There are enough variations in incentive schemes to fill many books (and they do), but certain fundamental design elements apply as requirements for success.
- First, the company has to succeed. Only targets and activities whose achievement advances the company's bottom line should be used to incent employees. Incentives should not be paid when the company is not succeeding. You must define what success means, but you should not reward
- Spell out in detail what you want the employee to achieve. Don’t assume that everybody knows – explain everything.
- Provide enough reward to influence behaviour. Like any incentive, if you want to
focus minds on certain behaviour you need to place a clearly visible carrot out in front.
- The greater the achievement, the greater should be the reward. Be generous when achievements are greater than expected.
- Make sure you can measure performance against quantifiable
The success of an incentive plan should be determined by the overall success of the
business. A successful incentive plan 1) measures achievement (not only effort), and 2) directly supports the company’s business. An incentive plan that does not achieve even these two minimum goals should be looked at carefully and either fixed or scrapped. Think about it, and stop wasting your money.
Inspired by an article on sales compensation by Chuck Csizmar, CMC Compensation Group