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10/13/2014

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Agree that 5% is not worth the trouble. I read somewhere (can't find the source now) 15% is really the point at which you get people's attention. 10% may be "iffy" but companies use it a lot.

"At the lower limits of incentive eligibility some companies start with an incentive target of 5%. However that low a reward opportunity isn't a carrot for anyone."

- Don't disagree, Chuck. But if it's in place, how do you take it away?

Early in my career I worked for an auto company who had a sophisticated annual compensation planning process. Later in my career working in other industries I found no planning at all. While we can all debate what pay increases are worth, one of the keys to a successful pay and incentive program is the critical review and analysis of the corporate plan, how the plan is tied to the bottom line and how people are rewarded in the plan. I worked in a company where as director of compensation the President and I annually reviewed more than 30 sales incentive plans. We both learned that in any incentive plan, the status quo never works and plan need to be revised, tweeked, deleted, etc. in order to achieve the objectives of the incentive plan. For example, if you introduce a new product, you need an incentive plan that encourages and rewards hose who are focused on the new product introduction and not necessarily the ability to earn more money. In short, don't take your plans for granted and make sure that the rewards are worth the effort and are focused on the results that the plan is targeted to achieve.

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