Overview of Incentive Plan Options
Incentives for employees are typically implemented with the goal of focusing attention on specific desired results. They allow an organization to more closely tie pay to results and performance by providing "at risk" compensation as part of the total compensation package.
Incentives can also enable organizations to improve the competitiveness of their total compensation package without raising base salaries.
Here are some considerations when crafting an incentive plan for your team:
Short-Term Incentives typically reward performance within a given year. Usually in the form of a cash reward, the at-risk nature provides immediate motivation to meet the goals.
Long-Term Incentives are typically offered to influence performance and results over a multi-year period. These types of incentives are often based on overall performance of the business unit, department, or corporation, and are usually paid in some form of equity ownership in the company.
Individual Incentive Plans are based on meeting work-related performance standards in terms of quality, productivity, customer satisfaction, safety or attendance, for example. These are most appropriate when performance can be measured objectively and employees have control over the outcomes.
Team or Group Incentive Plans reward collective performance. They are most effective when all group members are able to have some impact on meeting goals. You can choose the best implementation: rewards can be equal for each member or can be differentiated.
Organizational Incentive Plans are rewards based on performance of the entire organization and are most often used at the executive level to encourage teamwork and productivity. However, as you move down the organization, it often makes more sense to implement more direct incentives through individual or group incentives as described above.
Non-Monetary Rewards are important to consider as you craft an incentive plans. Remember – not everyone is motivated by money. Consider non-monetary incentives such as training and development, leadership opportunities, time off or other perks and benefits.
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