We have to aim high, don't we? This kind of aligned financial vision makes compensation a powerful tool in fueling business growth. All will tell you their incentive plans are intended to drive higher employee performance. 3. March 13, 2012 at 01:03 PM. There are nine different incentive plan types that company leaders can employ to reward long-term value creation. The content on MBA Skool has been created for educational & academic purpose only. When workforce members feel like they are critical contributors to the growth trajectory of the business, they perform differently. And the only part of compensation that is tied to the fulfillment of financial targets is incentive compensation. The natural extension of that mindset and approach is that people are being hired with the expectation they will become stewards of certain outcomes the company needs them to own. :-), Posted by: Truth is, you have to create the conditions for motivation - trust, transparency, a sense of shared interest, good work systems, etc. Without profits, companies cannot fuel growth. Well, like it or not, productivity drives business, and that in turn drives GDP – usually at a percentage of 2% a year. [13], Travel rewards can best be defined as a face-to-face event designed to motivate, either directly or indirectly. In a 2005 study conducted by the Center for Concept Development, 73% of respondents agreed that more stimulating, memorable incentive programs can be built around merchandise as opposed to cash rewards. How can we design and communicate rewards to applaud and spotlight the mindset that drives the behaviors? If you do – it might have great results. We live in a time when there has been a shift in the employment power structure. Some business leaders view incentive compensation as a tool for impacting employee behavior. And yet, depending on who you ask about why they pay incentives, you will receive a range of responses. The reward provides a cash incentive for the employee and a quality candidate for the company. Recruiting and retaining quality employees is a constant challenge for human resources professionals and small business management teams. This ensures that at least part of an employee’s compensation mirrors how owners are paid for their contributions. And not because today’s workers need to be bribed to do their jobs well. Wage stagnation is a huge issue, and it concerns the government. Organizations need to understand that offering pay incentives rooted in value-creation puts employees in control of their earnings while simultaneously protecting the financial interests of shareholders. An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. And great additional point of emphasis - guideposts and touchstones are particularly important as the waters get turbulent and move more quickly. Posted by: You can follow this conversation by subscribing to the comment feed for this post. A balanced approach helps create the alignment spoken of earlier between owner and employee vision and priorities. [9] A sales incentive plan (SIP) is a business tool used to motivate and compensate a sales professional or sales agent to meet goals or metrics over a specific period of time, usually broken into a plan for a fiscal quarter or fiscal year. On a macro level, businesses should aim to reward profit growth and the things that drive it (revenue increase, improved margins, etc.). If you lead a business and are struggling with developing an effective compensation approach, it might be the right time to have a conversation with a VisionLink consultant.