February | 2012 | CEO People Management

If an incentive plan is designed correctly and implemented properly it can reinforce the key objectives of the business, support the culture you want and have a significant affect on the performance and profitability.

Let’s start off with some definitions.

Firstly, any base salary review should have a significant focus on performance. If this is done properly the need for further incentives or “performance pay” is often removed.
Secondly, part of the definition of bonus in the English Oxford Dictionary is “over and above that which is normally expected”. We see this as a discretionary payment which a business may give to employees. There is no real contractual obligation to do this. Employees may see this as “cream on the top”, but often are not sure what to do to make sure they get it again.

We see incentives differently. This is a payment that will be made if certain actions are taken or targets achieved. It is a contractual obligation.

While bonuses in some businesses, usually small, private companies, can work, there are some downsides. They are usually provided without clear targets being set and they often lead to expectations that they will continue regardless of performance. Sometimes they can make the “giver” feel good but have little impact on employee performance.

On the other hand, they can build a strong culture within a business when the boss is seen to share some of the gains without any prior agreement to do so. Incentives are far more focused and for this article we will discuss a few guidelines to assist in implementing a plan that works.

The first step is to decide what you are trying to achieve. If it is something employees aren’t doing, but should be, will a financial incentive change their behaviour? Is there some other reason why they are not doing what they should be? If you are clear on what you want them to do and think an incentive will help, try asking employees what they think about the idea.
If you have decided that an incentive is the way forward – to either maintain good staff performance or encourage even further effort – then you need to make sure the measures you have in place align with your business objectives. Don’t set targets based on volume if your focus is on quality.
Participants in an incentive program should have some control over what is being measured. It is not much good providing an incentive for sales if someone has no influence on sales at all. The targets must be challenging, otherwise there is not much point in having a plan, but achievable. Where the targets are never achieved people will lose interest. Where they happen too easily it will be expected each time without any extra effort being expended.
The amount paid must be meaningful – too little won’t make the difference you want. A percentage of salary is usually best to have a similar affect on each participant. Non-financial incentives such as trips may have a different appeal for individual employees.
It should encourage high performers to stay with the company. It should be rewarding, with the chance of it being even more rewarding in the future. Long-term incentive plans can be designed to achieve this more easily than short-term plans. Often a combination of these plans can achieve the desired result, as just a focus on short term profit can deter investment in longer term plans that will bring future benefits.
Participants must be able to understand the measures and what they have to do to earn an incentive. It is no good having a complicated formula that no one understands. It should be clearly communicated in writing so there are no disagreements as to when it will be paid, how much and under what circumstances.

There should be a review process at regular intervals to determine if the plan is delivering the results you need.

If these guidelines are followed you stand a greater chance of success than if you approach setting targets and offering incentives in an ad-hoc way. You will also be able to avoid much of the friction that badly planned programs often cause.

Guest Author:

Paul Phillips, Horizon Management Group.

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People are reluctant to give each other feedback in the workplace. On the one hand, some people hold back on giving constructive feedback as they worry about how the other person will respond. But on the other hand, inaction leaves staff performance problems going unaddressed and building over time.

Even when constructive feedback is given, it is not always done well. People are not giving enough positive feedback either – due to either not appreciating the importance of recognition or getting stuck in unnecessary paperwork.

Here are five keys you can use to get a better result from any staff feedback you give.

Feedback is always better received from those with whom we have a good relationship. So get to really know your co-workers and manager and let them get to know you. Chat with them, tease them, laugh with them, and be human. You are effectively placing deposits in the emotional bank account of that relationship which increases the likelihood of your feedback being well-received.
Feedback also needs to be occurring regularly, not just out-of-the blue. A yearly performance review is nowhere near good enough. Touch base with your workmates at least on a weekly basis, letting them know what you are happy about. Some staff with a strong need for connection or recognition need feedback even more frequently. When you are giving positive feedback, you have to mean what you say, of course. If people sense you are not being genuine they will simply feel patronized. Positive feedback also has to be specific and targeted towards those things the individual values about themselves. Positive feedback that is specific and meaningful to the person is always better received.
Constructive feedback is always easier to give when it is asked for. But you will find constructive comments are better received when they are outweighed by five times more positive feedback. This does not mean that when you give feedback there needs to be five compliments followed by one criticism.
Of course, constructive feedback needs to be given in ways seen as respectfulby the person receiving it. So although your intentions may be respectful, it is important to monitor how your feedback is being received and to adjust yourself for the individual. For most people, simply sounding respectful and speaking to them privately will be sufficient. For the sensitive types, you can allow them to save face by criticising yourself first – perhaps you weren’t clear in what you were expecting from them. If you are going to criticise, keep this to their behaviour and not them as a person. You can soften the blow by using the ‘kiss, kick, kiss’ approach, where you start and finish on a positive note.You can also say what you would prefer to see rather than what you dislike. There is a difference between saying, ‘You’re a self-centred, control-freak!’ and saying, ‘I really would like to have more say in how I do things.’ But you are allowed to think the former.
Feedback is also better received if you are open to feedback yourself. Sometimes feedback will be uninvited, given poorly, and you may be feeling defensive. But remind yourself that it is only feedback. You won’t die from it and it is good that any frustrations are coming out. Apologise and agree where you can before offering something for the future. For example, ‘I’m sorry if I came across that way. And I agree you do need to have some say in how you do your work. How would you like to do your work differently?’

If you are in management, make it easy for others to give you feedback. Staff surveys are one option, but you can also do so by routinely asking, ‘What can I do to better support you in your role?’ You can also let them know you know you are not perfect and will be OK if they give you constructive comments. You could say,‘I know I have been caught up in my paperwork and haven’t touched base with you much of late. What do you need from me so you can feel better about your work?’

So, that’s it. You can give engaging feedback by:

Having a good relationship with that person
Being frequent, genuine, and specific with your feedback
Giving five times more positive feedback than constructive feedback overall
Monitoring how the other person is responding and adjusting your approach
Being open to feedback yourself

Guest Author:

Ken Warren is Australia’s leading speaker on Dealing with Demanding, Aggressive and Unmotivated People. With his engaging, interactive and positive approach, Ken has shown thousands how to turn difficult people around and bring out their best.