Ten Ways to Help Incentives Succeed

Dec. 21, 2004
Incentive plans need to meet primary objectives in order to be successful.

While manufacturers have long relied on incentives to motivate higher levels of employee performance, very few are successful, according to compensation consultants Hewitt Associates. Results of a survey conducted by Lincolnshire, Ill.-based firm show that one-third of the companies offering some type of variable pay program don't even track their plans' results. Of those that track results, only 22% meet or exceed their primary objectives, while 28% do not meet their primary objectives at all. To avoid becoming one of these grim statistics, companies should adhere to the following best practices.

  1. Involve line managers and employees in the plan's creation to ensure they'll support the plan.
  2. Set clear goals for the plan.
  3. Make sure the plan clearly communicates to employees what they should be doing differently.
  4. Ensure that employees can control the metrics that the plan is measuring.
  5. Tie the plan to the company's business plan or strategy.
  6. Make sure the plan has the right number of metrics (usually three to five) with targets that are neither too easy nor too hard to achieve.
  7. Give the plan time to succeed. It sometimes takes two or three years for the plan to change overall corporate performance.
  8. Change the plan as the business changes.
  9. Build employee trust in the plan with compensation that is clearly linked to goals and their achievement.
  10. Provide up-to-date information that allows employees to see how well they are performing against their goals and to make adjustments to improve performance.

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