The 2016 Incentive

Incentive, Bonus, 2016 Compensation, Compensation Planning

Now that the Thanksgivings are done it’s time to think 2016 goals and incentives. Incentive is the right word. You want to drive behavior toward achievement of your goals. 2016 is another year of minimal pay increases – great for employers but not so motivating for employees. Even if you allocate the entire pay budget to performance it is still unlikely to turn heads. 

How can the business grow and create opportunities for additional pay; more customers, more sales, increased profitability? Which of these or other ideas will generate net cash in your business? Set some reasonable goals and drive the team toward them with quantitative targets that frame the 2016 incentive.

Your bonus plan should create value. Most employers have a bonus plan because everyone else does. While it is needed to help attract scarce skills make it earn its keep. Stay away from formulas that reward fortuitous additional profitability and that share a portion with employees or that require a review of the year just completed before payout decisions are made. These have their place but they don’t drive specific behaviors.

Every company aspires to a performance culture and an incentive plan is the start. Carefully constructed goals don’t need to mean employees fighting each other to earn more pay either. The right plan will motivate team work and individual behavior. Every employee, every team, and every department should know their objectives and the budget includes bonus payout at target if those goals are met. Why not set the target payout slightly higher making it more of a stretch? If only the target is met the bonus pays out slightly less than budget. Use the incentive plan to drive business growth.

Beware and anticipate unintended consequences however. For example, if the goal is increased revenue make certain that they are profitable sales and the resulting profits can absorb the additional incentive payout. Ensure too that the formula cascades down through the organization so that everyone is working in the same direction and keep it simple.

The best incentives are the simplest. A meaningful incentive plan recognizing the organization’s culture and values will help it outperform the competition, add value, and improve efficiency. As an organization grows the CEO cannot be familiar with everyone’s contribution. A plan can therefore work as a proxy, cascading values and ensuring supervisors manage to them. Whether your plan promotes group behavior and or individual achievement it should be transparent, equitable, and driven by the businesses key metrics.

If we can help your organization get more out of its 2016 pay budget or help redesign your incentive plan please reach out 905 842 7916 or email.


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