Patty Hargrave

HR Can Help Your Company Stay on Track

Want to Encourage Employees to Achieve Results? Consider Incentive Pay

I don’t pay good wages because I have a lot of money; I have a lot of money because I pay good wages. 
                                                                    -------Robert Bosch, German industrialist, engineer and inventor

What is important to you and your business? If you’re like most employers or executives—productivity and results are very important. Your employees are also extremely important, and you may be looking for ways to reinforce employee behaviors that will also impact your bottom line. If you are considering incentive pay programs as a way to do that, you may want to consider the following: 

1. Incentive pay is a way for you and your employees to achieve desired results. For instance, a commonly known type of incentive pay, commissions, are used in organizations which allow sales people to constantly anticipate another payout as they look beyond the horizon.
2. Generally, if an incentive pay program is done right, it will help drive performance and meet efficiencies. You might establish this program as a “pay for production,” or “pay for performance over and above the normal job responsibilities,” which is how we see it used in most cases.
3. Incentive pay programs are valuable because employees’ performances have a direct impact on business results. These programs allow for individual employees to feel a sense of personal ownership—so they in turn approach their work like a shareholder—and they see themselves as major players contributing to the successful results of the business.
4. Incentive pay programs can also be applied to a group of employees. For example, you can set sales or production goals and apply your incentive program to a select group of employees. This type of payout program can also be developed to incentivize other business objectives, such as reducing costs or showing appreciation for a successful year.
5. These programs allow management the flexibility to reward for certain priorities that they consider important for running a business. So in these cases, you wouldn’t see incentive pay used for an overall ‘blanket effect.’ For example, you might want to encourage a certain group of employees to pull together so you use incentive pay as that extra push to meet a goal. Also, you can develop your program so you can aim employees toward specific targets, such as continuous improvement goals.
6. To be effective, an incentive pay program should be designed and carried through so that employees are motivated by it, rather than demoralized because of it.

In a future HRTools Insight, I will review some potential pitfalls to avoid, as well as unintended consequences that can occur, when developing an incentive pay program for your business and employees.

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