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Essentials for Incentive Plans

On Your Mark, Get Set, Wait… Before You Go:
Essentials for Incentive Plans

Before you add an incentive plan, there are several considerations to address to get ready. Answer these seven questions to assure you achieve success.

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1. What do you want to accomplish?

This may seem like stating the obvious, but you really do need be clear on what you what you want to accomplish with your incentive program with specificity. Then you need to build consensus among your key stake holders to confirm they share the same viewpoint. If you don’t do this up front ground work, your program may run off into a ditch and you may be left bewildered why others aren’t supporting you or why they are dissatisfied with the results.

2. What can you measure?

Effective incentive programs are built upon clear and trusted data. Going through the energy to put a plan in place that relies on a data base that is laden with errors is a recipe for disaster. Your reputation may become as tainted as the corrupted files. Be realistic about what can and can not be measured. If there are components missing, initiate conversation with your IT support and learn what it would take to add those missing variables. You may need to scale back your big plans into smaller steps, balancing what can truly be measured now versus what you’d ideally want as your measurement criteria to be in the future. Be sure what you are measuring is appropriate. The phrase “line of sight” means people can see a direct relationship between what they do, or don’t do, and what the outcome is. Good incentive plans achieve that line of sight.

3. What can you afford?

What amount of money do you want to spend? Ideal incentive plans are self-funded from increases in sales or productivity. It may sound silly, but document your assumptions and have another set of eyes double check your math. This is a great opportunity for building your partnership with your finance group.

4. What are the tax implications?

While you are conferring with the finance group on the funding of the incentive plan, also tap into their tax expertise. Tax laws are complicated and ever changing. Make sure you do your due diligence in the up front design to pre-think the tax implications to maximize the amount of those dollars going into your employees’ pockets and not directly to United States Treasury.

5. Is a pilot worthwhile?

Do you want to test your program in a smaller group or do you want to go corporate-wide from the start? Each has its pros and cons. Conducting a pilot will let you learn how the data flows and if your design does or does not affect behavior. The down-side is that it slows down a larger implementation and may result in jealousy or resentment with regards to who is in that pilot. Going into a full-scale organization wide rollout without a pilot is a bolder, faster, and riskier move. If there are flaws, they will be seen and felt on a much broader scale.

6. How long will this plan be in place?

Is your plan a one-time deal with a defined sunset clause or an on-going process? If you’re trying to complete a particular project or reach a certain milestone, the incentive may be short-lived.

7. Do you have your communication plan?

By definition, an incentive plan is to encourage a wanted behavior, or discourage unwanted behavior by associating a reward for the desired outcome. For this to work, you need to communicate the plan, then communicate it some more. Once at the beginning is not going to be enough. On-going communications with a fully crafted plan is a must. Prepare to share monthly results. We relate to stories. Can you get a story each month, perhaps an interview with someone sharing how he or she made a change in response to the incentive plan to supplement your data?

Prepared for Success

Answer these seven questions before you begin and you will increase your odds for a successful incentive plan for your organization.

Regards,

Beverly N. Dance, MBA, SPHR-CA, CCP, CEBS
dance@mba.berkeley.edu

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