A common trend in compensation plans is to pay for performance. No doubt about it; people pay attention when it comes to their own pocketbooks. Linking performance to short-term goals and action items in your strategic plan is a natural connection. Performance-based compensation is a huge way to structure performance plans. Check out Inc. Magazine’s compensation guide for ideas on compensation.
Although linking pay to performance is a good way to ensure that your plan gets implemented, it’s not the only factor.
Here are some best practices to make your incentive plan as successful as possible:
Tie incentives to corporate results, team results, and individual performance, where appropriate.
Fit the compensation plan in with your core values and culture.
Simplify a complicated plan so everyone, regardless of education level, can understand it.
Communicate your incentive plan as much as possible.
Involve employees in the process by sending an employee survey before you structure your plan to see what they’re looking for.
Shell out incentives in the form of control of one’s schedule, cash, time off, company perks, group outings, and so on. Don’t be tightfisted: Outstanding results can come from a history of outstanding rewards.
Get your employees energized about the incentive plan by making the plan exciting and motivational.
Share financial and business plans with employees and provide education if they don’t understand financial issues.
Don’t expect attitudes and behaviors to change overnight: Implementing an incentive program involves a long-term process, not a one-time event.
Remember the purpose of incentive plans is to change behavior and move your whole organization as a team toward your vision. Make sure that your incentive plans clearly link performance to business goals. That link exists to ensure that you reward only those behaviors that lead to accomplishing your business goals.