A carefully designed, well executed incentive compensation plan can help organizations motivate, reward and retain its employees.

Incentive compensation continues to be an important component for improving employee productivity by engaging employees to drive intended results. Incentives do not work when employees view the reward as an entitlement, leaving employees disappointed, and sometimes resentful, if incentive levels decrease from year-to-year.

An effective incentive plan not only measures and rewards desired behaviors, but it also aligns employee performance with agreed-upon financial and strategic business objectives. The best incentive compensation plans are rational, transparent and provide a clear “line of sight” for both eligible employees and those who oversee and administer the program. If employees and management are unclear how incentive compensation is achieved, it can demotivate employees. It is not always easy to identify criteria and measure behaviors that truly align with organizational objectives without becoming overly complicated and complex.

The bottom line is, keep it simple, focused and important.

Whatever objectives, goals or criteria comprise an incentive compensation plan, the structure needs to be designed in a way that identifies plan requirements and inspires employees to achieve them. In addition to financial objectives, incentive compensation programs often incorporate various qualitative human resource and organizational objectives, such as creating a culture of ownership, promoting teamwork, service milestones and customer service feedback.

The best, most efficient plans make clear to employees what objective they are to achieve, how they are compensated for meeting those objectives and when they will see the reward.

Successful employee incentive plans help to drive desired behaviors by accomplishing organizational objectives by underscoring a company’s culture, strategic goals and business while communicating what the company needs to do to be successful. To learn more about how RSM can assist you with your other business needs, contact RSM’s management consulting professionals at 800.274.3978 or email us.