The Internet offers HR professionals a wealth of information on incentive plans — handing out cash has never been so easy.
Are incentive plans worth it?
To fully enjoy this article, you will need to separately view or print the graphics using Adobe. The question asked herein is, “Why design and implement an incentive plan?” The design work is expensive, implementation is disruptive and paying out incentives can be costly. Is there a return on investment? I won’t spoil the surprise by telling you the answers. Regardless of whether you agree or disagree with the findings, there is an excellent list of “lessons learned” at the end of the article.
An inside look at incentive pay
The University of California, San Francisco School of Medicine has established an incentive pay program “to improve individual and organizational performance through outstanding personal and team efforts.” This is a 15-page pdf (Adobe) document that can be printed and saved. This appears to be the school’s actual program presented in detail and may not even be intended for public viewing. Nonetheless, it offers an interesting view into the incentive program, including design and administration. Included in the appendix are a series of “screens” which likely represent the administration software.
A head start
Although it’s from 1999, this article, published by Deloitte & Touche, looks at some of the vehicles in common use for providing incentive pay and comments on the tax consequences from a Canadian perspective. The article won’t replace solid tax advice when it’s time to set up a plan, but it will provide a head start in discussions with advisors.
This link offers a quick read on the topic, published by Business Standard in New Delhi, India. Even half a world away, the key messages are the same. This article presents the concepts in the form of the “Nine Commandments.” (Couldn’t they come up with one more?) For example, alignment: incentive payments that managers and employees receive must be strongly linked to their success at creating wealth for the owners. Another commandment is that plans must be definitive: there should be an explicit and reliable link between the bonus and performance. Still another is community: ideally, everyone — from board members and general managers to the lowliest employees — should participate in an incentive-based bonus plan.
Striking a balance
There are probably few
readers operating a food co-operative. Nonetheless, this grocer’s site offers advice to any business thinking about establishing an incentive pay program. Included are the “two rules” — motivating the employee and measurable outcomes. Issues considered include balancing base salary and incentive levels, balancing short-range and long-range objectives and determining incentives when goals are partially achieved. Finally, a number of “sample plans” are offered. While these samples are somewhat simplistic, they are an excellent starting point in designing a program.
This Inc.com page is a listing of 15 links to other Inc.com articles. Topics considered include compensation strategy with “A Quick Breakdown of Strategic Pay,” compensation as motivation including “14 Rules to Follow when designing an Incentive Pay Plan,” and employee ownership including “Motherhood, Apple Pie, and Stock Options.” It will certainly take a while to read everything here. This is a good site to bookmark for long-term reference.
Bill Fotsch, a management consultant, offers this article “Enlightened Capitalism.” A high-level view of getting employees at all levels involved in the success of the company. In Fotsch’s words, “I do not think the benefits of getting employees to think and act like owners are hard to understand. The real challenge is how to get this accomplished. What I would like to do is share what we have learned, and continue to learn, such that you and your company can gain from that experience.”
Joe Nunes is an actuary and president of Actuarial Solutions Inc. in Oakville, Ont. He can be reached at (905) 257-2038 or Joe@ ActuarialSolutionsInc.com.