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.
- Involve line managers and employees in the plan's creation to ensure they'll support the plan.
- Set clear goals for the plan.
- Make sure the plan clearly communicates to employees what they should be doing differently.
- Ensure that employees can control the metrics that the plan is measuring.
- Tie the plan to the company's business plan or strategy.
- 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.
- Give the plan time to succeed. It sometimes takes two or three years for the plan to change overall corporate performance.
- Change the plan as the business changes.
- Build employee trust in the plan with compensation that is clearly linked to goals and their achievement.
- 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.
