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The Three Conversations You Need to Have When Reviewing Incentive Plans

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Erin Cushing
on July 27, 2016

It’s almost that time of year for compensation professionals – time to review employee incentive plans to determine how (or if) your organization’s plans should move forward.

When building or reviewing an incentive plan, there are three levels to think about, and three places in the organization where you should go for more information:

Strategy – Your executive leadership should help inform you on the strategy that guides your incentive plans.

Execution – The business unit/departmental managers who are often on the front lines of delivering incentives plans can offer great insight into the effectiveness of incentive plans on motivating and retaining employees – major goals for any sort of incentive program.

Customer Experience – When it comes to incentive programs, your “customers” are the employees in your organization participating in the program. You should check in with them to make sure communication around incentives is adequate; in short, you should check in on your “customer support” structure.

While it might be tempting to try to look at external best practices in order to help inform decisions, you can’t make a decision about an incentive plan without internal input. Here are some of the questions you should ask these internal stakeholders, as outlined by Compensation Café:

When speaking with Executives:

Executives are the best resources who can help you align the incentive plan to organizational goals, and to inform the overall strategy of the program. Make sure you know what your organization’s top strategic initiatives are in the next 12 months – then ask your executives how the incentive should support these goals and help the organization meet them.

If you already have an incentive program in place, ask your executives if they think the incentive program is designed to achieve their priorities, and where the gaps, in any, reside.

Why? This information cuts down to the core of your incentive plan. You’re asking your executive specifically what the incentive plan should accomplish, and making sure you’re aligning with their strategic priorities. Once you know what you should accomplish, you can think of how to go about doing so, and making changes if necessary.

When speaking with Managers:

Managers are a great resource to learn about how the program is working “on the front lines” so to speak. Ask managers if they understand the incentive plan and how it works. Follow up with managers to learn how they perceive their direct reports’ understanding of the plans. Also ask managers if incentive plans are making positive differences in employees’ efforts to achieve departmental or team goals. Use this time to figure out what elements of the plan are working well and which elements need to be changed. Finally, ask managers if their employees understand what behaviors and outcomes they need to demonstrate in their day to day activities in order to earn a reward by affecting their plan measures.

Why? Managers are working with their employees and direct reports every day, and have better insight into how the team’s performance overall affects goal achievement, as well as how individual contributor’s move the needle within their departments. They can be the best measure of the practical, tactical portions of your incentive plan. What works, and why is that more successful than the underperforming parts of the plan? You need to know these elements in order to build a program that incentivizes the right behaviors and outcomes managers and executives are looking for.

Additionally, it is critically important to gauge whether managers and employees understand how the incentive plan works, and that they can communicate that understanding effectively. Miscommunication not only affects overall and individual performance, but it can also foster resentment and disengagement in stellar employees who believe they are not being rewarded when they should be – which is a critical retention issue. Make sure your managers are communicating what you need them to in order to make the program successful. 

When speaking with Employees:

These are the people who actively participate in the incentive program, so you have to be totally sure that they understand what is expected of them in order to affect their plans. Gauge whether or not they are receiving consistent information about their progress towards earning a reward. If not, what is the communication cadence they are expecting or hoping for? How would employees improve either the plan or communication around the plan?

Why? All of this employee feedback is “customer feedback” – use it to help you clarify the picture around your incentive plan. If these are the individuals you want to influence, you need to make sure that they understand what is expected of them, and that the program you’re using actually influences their behaviors and performance.

Incentive plans are just one piece of the compensation puzzle. The right compensation management technology partner makes it easy for you to get a full picture of the compensation calculations and programs you need to execute to influence business performance. See why industry experts at IDC consider PeopleFluent a Leader in compensation management – download the report today!




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