By Todd Ballowe
Paying for performance – The Right Way

How to make sure that your employees have the proper incentives to adopt your strategic plan as their own

As a leader in your organization who has put the time and effort into building your strategic plan, you want to be sure your employees adopt your vision and sense of purpose. As part of our “how to get the most of your performance management software” series, we now look at performance-based compensation as a tool to aide implementation.

A common trend in compensation plans is to pay for performance. No doubt about it; people pay attention when it comes to their own pocket books. Linking performance to short-term goals and action items in your strategic plan is a natural connection. Performance-based compensation is a huge way to structure performance plans. Check out Inc. Magazine’s compensation guide for ideas on compensation.

Here are some best practices to make your incentive plan as successful as possible:

  • Tie incentives to corporate results, team results, and individual performance, where appropriate.
  • Fit the compensation plan in with your core values and culture.
  • Simplify a complicated plan so everyone, regardless of education level, can understand it.
  • Communicate your incentive plan as much as possible.
  • Involve employees in the process by sending out an employee survey before you structure your plan to see what they’re looking for.
  • Shell out incentives in the form of cash, time off, company perks, group outings, and so on. Don’t be tightfisted: Outstanding results can come from a history of outstanding rewards.
  • Get your employees energized about the incentive plan by making the plan exciting and motivational.
  • Share financial and business plans with employees and provide education if they don’t understand financial issues.
  • Don’t expect attitudes and behaviors to change overnight: Implementing an incentive program involves a long-term process, not a one-time event.

P4P should result in behavioral change

Remember the purpose of incentive plans is to change behavior and move your whole organization as a team toward your vision. Make sure that your incentive plans clearly link performance to business goals. That link exists to ensure that you reward only those behaviors that lead to accomplishing your business goals. In addition, you can then track employee actions through your corporate performance management system and make sure no high-perfomance employee goes unrewarded.

Accountability is also needed to make it work

Don’t forget to discuss the consequences for non-performance with your team. Just like rewards, consequences are critical in any action plan. Often, the consequences are removal from the team that’s working on the goals. Peer pressure creates such an intense expectation of performance that it causes action, so hold monthly strategy meetings where everyone has to publicly report on their progress. If you had to give a report in front of your peers, you’d have your act together, right? Just the thought of humiliating yourself in front of the team for non-performance may make you sick to your stomach.


>> Continue reading with Step Three: Coaching for Achievement