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Performance-Based Management

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Are your performance incentives driving the results you want?

For decades, designing incentive programs was a simple exercise of finding the right mix of compensation and benefits such as health insurance and vacation time. Those days are over. Business organizations now understand that a personalized incentive system is essential to attracting, motivating, and developing talent. So why are so many companies falling short?

Incentives are in the midst of a transition from standardized to the personalized.  Today companies understand that effective rewards programs need to match the needs and preferences of each employee. Done correctly, this new approach to performance-based management can become a huge competitive advantage.

Employees respond favorably to incentive programs that provide raises, bonuses, or other perks more often than the traditional once-a-year reward system.  Recent research showed that employees who receive regular small rewards, in the form of money, perks, or recognition, are eight times more engaged than those who receive a bonus once a year.  (See SHRM/Globoforce employee recognition report, 2018.)

Most employee incentive programs are narrowly focused on experience and tenure.  Many companies are missing an opportunity to better understand worker preferences and tailor a wider range of rewards to a more diverse workforce. Individualized incentives like schedule flexibility, developmental opportunities, and recognition are often more motivating and they usually cost less.

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Align for Action. Achieve Results

We can help your business align incentives and rewards with your company goals by identifying the behaviors that drive business outcomes. When a company creates the right incentives and rewards for their people, they profit with their people, and everybody wins.

Alignment between incentives, individual preferences, and company goals leads to results.  Bonus amounts can be tied to the achievement of specific goals.  Long-term stock options can be based on leadership activities and tenure.  Promotions to leadership roles can be tied to specific achievements.  Some companies now provide a menu of incentive and reward options when they are making an employment offer. The new hire could choose salary or stock options; an extra week of vacation, work schedule flexibility (e.g. more 3 day weekends), higher base pay or a higher bonus based on specific results.

Seventy-five percent of employees said that their companies should change performance management practices, and less than forty percent of corporate leaders said that these practices helped achieve business objectives. (Companies are scrapping annual performance reviews for real-time feedback, See Alexia Elejalde-Ruiz, Chicago Tribune, April 22, 2016).

Employee incentives and rewards are the last area of human capital to become individualized, even though personal preferences may be the most important in this area.  Companies that identify individual preferences and then personalize rewards have a distinct advantage in the talent market.  Employees want customized incentives and rewards that reflect their values and preferences—not a one-size-fits-all approach rooted in the past.  Here are few ways to deliver what employees want:

Profit Sharing

Profit sharing plans offer employees the chance to share in the company’s pre-tax profits, giving the employees a sense of participation in the company’s success.

Sales Commissions

Set up incremental sales commission levels.  When sales surpass a stated level, the commission rate increases.

Gain Sharing

Gain sharing plans are an incentive plan in which employees receive benefits directly as a result of cost-saving measures that they initiate or identify.

Retention Bonus

A retention bonus is a payment or reward outside of an employee’s regular salary that is offered as an incentive to keep a key employee on the job during a critical business cycle, such as a merger or acquisition, or during a crucial production period.

Team Bonus

Incentive pay plans can be based on the performance of the team, as well as the individual.

Project Bonus

Organizations can structure bonus payments at the end of a project timeline to give employees extra motivation to see the project through to completion.

 

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