Incentive programs: Butteriss on human resources
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A recent survey inPROFITmagazine showed that bonuses, profit sharing, and stock options are the main ways used to reward key employees by past PROFIT 100 winners. Companies participating in the survey said that salary should form about 65 to 76% of total compensation, with the balance coming from performance-related incentives. Incentives are critical to retain those employees who are essential to the company’s success. Management needs to recognize who these vital contributors are and make sure they know that they are valued.
However, performance-related incentives do not appeal to all employees. This indicates that a company may need to have a group of incentive programs, some of which are performance-related to stimulate the more creative and adventurous employee, others of which are more generally related to the company’s overall success to appeal to the employee more concerned with security.
Eight characteristics of successful incentive plans
- Clarity: Every incentive plan must clearly spell out the goal that needs to be achieved, whether it is higher profits, new clients, or greater market share. It is also important to establish a clear appraisal process for any award or bonus system.
- Employee Involvement: Involve employees in the design of the plan, or they will be unlikely to commit to it.
- Influence: Make sure that the results required to reach the established goals can be influenced by employees. It is difficult to get enthusiastic about things that you can’t influence or have some control over.
- Attainability: Ensure that the goals are possible. If the bar is set too high, employees may not even try.
- Simplicity: A good incentive plan allows employees to track their progress easily and calculate their rewards. Aim for two or three measurable goals at most.
- Publicity: Employees need to know that the plan exists, and what they have to do to be awarded the incentive. Communicating the plan is vital to its success.
- Renewal: Review and revise incentive plans regularly to ensure they still support your business objectives.
- Affordability: The company must be able to bear the cost of the plan.
Different types of incentive programs
There are many different types of incentive programs. The ones noted below are the most widely used:
- Profit Sharing
- Project Milestone and Completion Bonuses
- Special Awards
- Employee Share Programs and Stock Options
Copyright© 1999 by Margaret Butteriss. All rights reserved. Published by John Wiley& Sons Canada, Inc.
www.amazon.ca/Help-Wanted-Complete-Resources-Entrepreneurs/dp/0471643882
References
Butteriss, M. (1999).Help Wanted: The Complete Guide to Human Resources for Canadian Entrepreneurs.Toronto: John Wiley& Sons. pp.112-120.
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