SilverLink - Spring/Summer 2008 - (Page 23)

EMPLOYEE BENEFITS Compensation Services Show Me the Money Why Incentives Drive Performance by Roxanne Krasno, SPHR, CCP “Why use incentives? It’s simple: To accelerate the performance of your organization and its people. When people can inﬂuence meeting goals and incentives are used as a part of employee pay, the organization’s goals are much more likely to be achieved than when incentives aren’t used.”1 The world seems to be shrinking. Countries that were once days away are now as close as the nearest cell phone. E-mail, fax and teleconference can transform any organization from local to global. With global competition, organizations must strive to maintain employee productivity while keeping costs to a minimum. As they searched for solutions, many employers re-learned a simple truth—pay can drive company performance. Not just for salespeople and executives (as was once the case), but for all employees. As a result, companies are beginning to broaden their use of incentive pay as a means to foster increased worker productivity across all employee classiﬁcations (i.e., merit pay, gain sharing, proﬁt sharing or other motivational programs to engage employees). up spending an increased amount of time and money to re-motivate employees. There is also the potential for lost revenue due to lower productivity. Communication is Critical Management and supervisors must clearly communicate the speciﬁcs of the incentive plan to employees throughout the course of the plan year. There should be no question about what is expected and how those expectations relate to potential payouts. Using the SMART approach can help clarify and drive the communication process: Speciﬁc Measurable Achievable Relevant Time bound A successful incentive plan focuses on eligibility and includes a method to gauge performance in relation to an employee’s deﬁned goals within the plan. The type of incentive offered and frequency to employees are important factors; however, one could argue that the true test of the plan’s effectiveness is how it performs once it is rolled out. The implementation and success of each employer’s incentive plan can only be improved by constant monitoring and through the use of an ongoing dualperspective evaluation process (employer and employee). Reward, not Entitlement Incentive pay is not a new concept to the workforce. But this generation has an even greater interest in employer-managed incentive programs. It has become quite common for potential employees to ask about incentive programs during an initial job interview. Unfortunately, however, employees often see incentive pay plans as a promise made by the employer instead of a reward for exceptional performance. Incentive plans were never designed to promote a mentality of entitlement. To prevent potential problems, it is critical that incentive pay programs be implemented with great thought, planning and care. When an incentive plan is successful, the rewards for both employees and employers can be great. Increased job satisfaction, productivity and earnings beneﬁt everyone. On the other hand, if the incentive plan is implemented haphazardly, the results can be disastrous. Failure to meet goals can result in plummeting employee morale—which can have an adverse effect on productivity and job satisfaction. As a result, the employer may end 23 SILVERLINK — SPRING / SUMMER 2008 Laying a Good Foundation Incentive plan design is a lot like the old carpenter’s adage: “Measure twice and cut once.” Organizations need to focus on the fundamentals so the plan is implemented correctly the ﬁrst time. The foundation of any good incentive plan uses many building blocks, which may include the following: • • • • • A clear statement of the program’s goals Methodology to ensure that the right people in the organization are eligible Performance measurements to determine that goal actualization is valid and reliable Challenging but reachable goals Appropriate type, amount and frequency of plan rewards

Table of Contents Feed for the Digital Edition of SilverLink - Spring/Summer 2008

SilverLink - Spring/Summer 2008 Contents Risk Management: Mitigate & Educate Disastrous Distractions Accounts Receivable BoomerCare Risk Reduction, What’s Your Function? Time Out! Double Down Employee Benefits: Who’s Paying Whom for What? Time to Reconcile Keep Your Eye on the Pension Prize Show Me the Money Private Client Services: A Generous Strategy Is There Any Good News Left? Special Insurance for Special Times Client Spotlight: Omaha Performing Arts Internal Happenings: SilverStone Group Wellness Activities Group

SilverLink - Spring/Summer 2008

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