Incentive Compensation Options

Compensation and Benefits

Recent human resources compensation surveys indicate that most companies use some sort of incentive plan to motivate employees. The most popular reward programs include bonus systems, profit-sharing and merit pay.

The the­o­ry is sim­ple and com­pelling. Employ­ees are more pro­duc­tive if part of their com­pen­sa­tion is tied to the company’s busi­ness objec­tives. They will direct their efforts toward hit­ting goals, and they are more inclined to tack­le what­ev­er gets in the way.

The num­bers tell the sto­ry. You can get a sub­stan­tial return for your invest­ment in an effec­tive incen­tive com­pen­sa­tion pro­gram. The Con­sor­tium for Alter­na­tive Rewards Strate­gies stud­ied 733 com­pa­nies and found finan­cial rewards aver­ag­ing $2.22 for every dol­lar of payout.

Fam­i­ly owned busi­ness­es are faced with unique chal­lenges when it comes to devel­op­ing equi­table incen­tive plans for employ­ees. These plans are inher­ent­ly sub­ject to height­ened scruti­ny when inter­per­son­al fam­i­ly dynam­ics are involved. Per­haps even greater scruti­ny comes from those who fall out­side the fam­i­ly bloodline.

The good news is that your busi­ness has sev­er­al excel­lent options avail­able these days. You can pick and choose from time test­ed pro­grams to cre­ate a cus­tomized sys­tem that gen­er­ates spe­cif­ic results for your unique busi­ness objectives.

Gain Sharing Vs. Goal Sharing

Gain Shar­ing, in its sim­plest form, rewards employ­ees based on a company’s per­for­mance. These plans are com­pa­ny­wide, with a uni­form mea­sure­ment sys­tem gen­er­al­ly based on salary.

A typ­i­cal gain shar­ing sce­nario: Com­pa­ny ABC has declin­ing gross prof­its. The objec­tive is to increase prof­its by a cer­tain per­cent­age. Com­pa­ny ABC puts a plan into place that promis­es employ­ees that gross mar­gin increas­es above 15 per­cent will be shared 50/50 with employees.

Goal Shar­ing, in con­trast, rewards employ­ees for meet­ing spe­cif­ic goals. These goals are not nec­es­sar­i­ly based on the bot­tom line and may include qual­i­ty, ser­vice and job per­for­mance. Goal Shar­ing can be devel­oped at a team lev­el or indi­vid­ual level.

With­in a Goal Shar­ing sce­nario, Com­pa­ny ABC may set a qual­i­ty goal for a line crew. If that goal is met, all on that team are reward­ed accordingly.

 Rewarding and Individuals Compensation

There are a num­ber of great tools avail­able for cre­at­ing com­pen­sa­tion plans for key employ­ees. Cre­at­ing indi­vid­ual goals and reward­ing them accord­ing­ly ensures a “lev­el play­ing field.” The Bal­anced Score­card Sys­tem is one such example.

This sys­tem con­sid­ers an individual’s role in help­ing a com­pa­ny meet its short term objec­tives and long term goals. These items should be clear­ly expressed in the company’s strate­gic busi­ness plan.

What does that per­son need to achieve in order to ensure the company’s suc­cess? Both the employ­ee and the exec­u­tive man­age­ment team should con­tribute to the scorecard—agreeing on goals, time­lines and a mea­sure­ment sys­tem that is equi­table and achievable.

Team Plans

Cre­at­ing incen­tive pro­grams with­in a team envi­ron­ment has sev­er­al key ben­e­fits. Mak­ing goals con­tin­gent on the efforts of a team dis­cour­ages “free rid­ers” and cap­i­tal­izes on the cohe­sion and per­ceived pres­sure from a group.
There are sev­er­al fac­tors that cat­alyze suc­cess in imple­ment­ing a team pro­gram. First, you must make the incen­tive worth­while and empow­er team mem­bers to meet attain­able goals. Eval­u­a­tion and rewards must con­sid­er the dif­fi­cul­ty of the assign­ment and the prob­a­bil­i­ty of fail­ure. Peo­ple will not take risks if they are penal­ized for tak­ing on dif­fi­cult assignments.

It is also impor­tant to reward ear­ly and often, link­ing rewards to dif­fer­ent phas­es of projects. This rein­forces short term accom­plish­ments with­out los­ing sight of long-term goals. You should also con­sid­er reduc­ing the hier­ar­chies that cre­ate sta­tus and pow­er dif­fer­en­tials. Flat­ten or elim­i­nate job titles for pur­pos­es of that goal.

Last­ly, you should con­sid­er reward­ing teams through lump­sum pay­ments for land­mark accom­plish­ments. Be sure to rec­og­nize indi­vid­ual excel­lence by iden­ti­fy­ing and reward­ing key con­trib­u­tors through group nom­i­na­tion, using cross func­tion­al groups for the eval­u­a­tion of nominees.

Keys To Implementation

Don’t expect instant suc­cess. The most suc­cess­ful incen­tive plans involve a long term process. Ide­al­ly, they are root­ed in a com­pre­hen­sive strate­gic busi­ness plan that clear­ly defines the company’s long term goals and short term objectives.
Incen­tive plans often fail when there is not a busi­ness case for the plan. They also fail when they don’t receive ongo­ing enthu­si­asm and sup­port from exec­u­tive management.

Com­pa­nies must care­ful­ly eval­u­ate whether or not a giv­en incen­tive plan is worth the effort. What is the pay­back ratio (change in net prof­it divid­ed by total payout)?

Addi­tion­al­ly, there is a psy­chol­o­gy that under­scores bonus sys­tems. If the pay­out is too large, employ­ees wor­ry about things beyond their con­trol. If the pay­out is too small, employ­ees may deter­mine there is too much com­pe­ti­tion, there­fore it is not worth the effort.

It is vital­ly impor­tant that incen­tive pro­grams employ very tan­gi­ble mea­sur­able and vis­i­ble objec­tives. You may want to assign points or use a weight­ing sys­tem that ensures com­plete objec­tiv­i­ty. It is also wise to pub­li­cize progress toward a goal. Make a team or goal “score­card” vis­i­ble for every­one affect­ed, and give feed­back freely.

In con­clu­sion, the most suc­cess­ful incen­tive pro­grams include two major fac­tors. Goals are direct­ly con­nect­ed to com­pa­ny objec­tives, and those who stand to gain from the pro­gram are involved in its development.

Reprint­ed with per­mis­sion from The Fam­i­ly Busi­ness Report spon­sored by the Goer­ing Cen­ter at the Uni­ver­si­ty of Cincin­nati Col­lege of Busi­ness Administration.


ویژگی‌های خاص کارگاه‌های آموزشی رایان راهبرد چیست؟

کارگاه‌های رایان راهبرد بر اساس مدل‌ها و روش‌های روز دنیا و با رویکرد ایجاد مهارت تخصصی تدارک دیده شده‌اند و یادگیری انجام موضوع آموزش پس از مشارکت فعال تضمین شده است. این مهارت‌ها برای مدیران و متخصصان منابع انسانی یک مزیت رقابتی ایجاد می‌کنند تا در موقعیت‌های شغلی مناسبی در این حرفه قرار گیرند.

رویکرد رایان راهبرد در ارائۀ خدمات مشاوره منابع انسانی چگونه است؟

رایان راهبرد تأکید زیادی به درونی‌سازی متدهای به کار گرفته‌شده در سازمان‌ها دارد. به طوری که تمامی پروژه‌های مشاوره پس از آموزش به ذینفعان و متولیان منابع انسانی سازمان آغاز می‌شوند. بدین ترتیب اجرا با آگاهی از دورنما و تسلط بر تکنیک همراه خواهد بود. سازمان نیز در آینده وابسته به مشاور نبوده و می‌تواند خود، به‌روز‌رسانی‌ها را متناسب با تغییرات پیش برد.

مطالب و یادداشت‌های وب سایت رایان راهبرد چابک چه ویژگی‌هایی دارد؟

کادر تحریریه رایان راهبرد چابک متشکل از متخصصان منابع انسانی با تسلط بر روزنامه‌نگاری است و متفاوت با فعالان دیجیتال مارکتینگ فعال در فضای مجازی و شبکه‌های اجتماعی، به کیفیت محتوا وفادارند. مطالب و یادداشت‌هایی که در وب سایت منتشر می‌شوند، عمدتاً محتوای تولیدی و یا ترجمه‌ای از روندها و سیگنال‌های موجود در فضای جهانی منابع انسانی است که خاص رایان راهبرد است. این محتواها برای اولین بار به زبان فارسی منتشر می‌شوند.

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