Editor's Note: I'll bet there are more. Add your own, please!
I continue to be amazed at the many ways that companies manage to sabotage their own incentive plan efforts. Just for fun, I thought I'd compile a list of some of my favorite fails. I'm sure you have your own to add!
1. The Borrowed Plan. Why bother with the hassle of creating an incentive plan designed to support your company's competitive challenges, business priorities, values and culture when you can simply slap in the one your old employer used or the one that the guy from your networking group emailed you. Easy, peasy. Problem solved.
2. The Last Minute Roll-Out. You just couldn't find the time to work on the incentive plan until your boss reminded you (again) that it's one of your KPIs for the year. Thus reminded, you put one together quickly and slide it in place quietly two-thirds of the way through the fiscal year. Maybe nobody will notice. Heck, it's not like you're trying to get people's attention or change their behavior.
3. Refuse to Say What You're Trying to Accomplish. Defining plan purpose and objectives? Seriously? This is the real world where we don't have the time for such academic exercises. The Board has declared that there will be an incentive and so an incentive plan there will be. I already have a design in mind that I like, so that's what we'll go forward with.
4. Ignore the Real Problems. You and I both know that the reason for our drop in manufacturing productivity is the lack of organization and the poor communication surrounding all the recent product changes. Engineering and manufacturing management haven't been on speaking terms in months, and plant employee morale is at an all-time low. But senior management is insisting on an incentive plan to spur productivity, so let's give them what they want - no questions asked.
5. Ignore Funding and Cost Questions. What will it cost? What will it pay out under different scenarios? Return on investment? Seriously, who has time to sit and figure all that out? Plenty of time to worry about that at year end.
6. Documentation is for Sissies. Formal plan documents? You must be kidding! We explained the basics of the plan at the quarterly staff meeting. People basically get it - at least at a high level - and they're all excited about the possibility of a payout. It's all good. What could go wrong?
7. The Payout Fail. So now it's year end, incentive goals were not met, the plan isn't going to pay anything out, and people are ticked. Really ticked. Yes, you probably could have explained it better and set the plan threshold more thoughtfully. OK, it's a disaster. So let's just pay them out something - anything - just enough to take care of all the complaining and get this whole thing behind us. We'll start over with a fresh new plan next year, and this time we'll really mean it.
8. Squandering the Teaching Moment. Plan roll-out was completed and the plan announcement memo from HR went out on time. But now people are going to their managers with all these questions. How is net income calculated? What things can the company do to maximize earnings? What does their department do that helps the company be profitable? Are there things in their job that they could do differently to better their odds of earning an award? Our managers are already busy and overwhelmed - they are not prepared for these conversations and they don't really have the time for the distraction. What to do?
9. Balance? What Balance? Hey, management wanted us to use incentive to increase productivity, so we gave them a straightforward productivity-based incentive plan. How were we supposed to know that a relentless, single-minded focus on productivity could result in problems with quality and employee safety?
What incentive plan fails have you witnessed?
Ann Bares is the Founder and Editor of Compensation Café, Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting and survey administration services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School and enjoys reading in her spare time. Follow her on Twitter at @annbares.
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