How To Sustain The Success Of Your Incentive Plan After Implementation

The following article is a series of three articles on how to implement and sustain your incentive plan to motivate your employees.

It is written by the incentive and remuneration specialist, Mike Honnet from Mike Honnet Consulting.

If you want full overview on Employee Incentive programs, just follow this link...

And if you want to read Mike’s article on how to implement your Incentive program, follow this link...

The most important key elements for the sustained success of your incentives scheme are the following:

Flexibility

Your incentive scheme must be able to adapt and change as the business grows and changes.

Almost invariably, schemes that fail are those that are not sufficiently adaptive. They tend to "lock in" measures and standards; and participants develop the expectation of payment, simply because performance standards are met.

The most successful incentive scheme is those managed by people who understand that the primary aim of the plan is not to deliver extra pay to participants, but to contribute to business success.

It goes without saying that you will have to persuade your people that sustainable business success is a worthier long-term cause, from their point of view, than increased pay.

They will also have to be convinced that changing performance expectations and/or measures from time to time is legitimate, because the primary aim is to sustain business success.

Multiple Measures

This is a very accurate predictor of success. Not only should the incentive scheme have multiple measures of performance, but these should also be competing measures. That is, they should be chosen in such a way that success on one measure does not also predict success on the other measures.

The effect of having multiple (and preferably competing) measures is to encourage participants in the incentive plan to think in terms of optimization. Their focus is immediately taken in the direction of improving business performance, rather than the quickest and easiest way of increasing the incentive payout.

Monitoring and Evaluation

An incentive plan that are not monitored and evaluated formally and systematically against the intended business outcomes are invariably those that have little or no business impact.

Not that payouts cease; just that ongoing, accumulative performance improvement is not being achieved.

"If you don’t measure it you can’t manage it". An Incentive scheme should be treated as ongoing management initiatives, requiring continual review and redirection.

It is however, pointless monitoring and evaluating unless this is done against intended outcomes and goals defined at the outset as reasons for implementing the scheme.

Using modern state of the art evaluation techniques, one can go further than just assessing the impact on business measures, to assessing the ROI of the incentive plan.

Simplification

Newcomers to incentive design often start with complex incentive plan designs: They often include formulae for adjustments for the effects of factors beyond the control of participants; calculations to offset the impact of indirect labor on production processes; and productivity baselines for each and every little process.

These schemes are too complex to be practical because the designers have tried to make them too perfect to account for every possible eventuality.

Experience shows that it pays dividends in terms of impact on "bottom-line", to keep incentive schemes simple. The performance/reward relationship is easier to discern when the scheme itself is simple.

Celebration of Success

Rewarding people for achievement is an act of celebration. It underscores business necessity, but it also allows people to savor their successes.

Failure to celebrate success and recognize the importance of enjoying work and achievement can result in unhealthy levels of stress being experienced by the incentive plan participants.

Celebration requires communication; and there is enormous symbolic value to be gained from getting very senior people to do the communicating: "If it's important to the 'bosses'; it had better be important to us!"

If you adhere to these guidelines, your incentive plan will have a significantly improved probability of triggering a real and sustainable improvement in the performance of your business.

If you would like assistance in making work rewarding for your people, or to discuss topics raised in this article, please contact Mike via his website at www.mikehonnet.com

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Return from Incentive Plan Implementation to Sustainable Employee Motivation

Return from Incentive Plan Implementation to Employee Incentive program