What is an incentive plan and is it any good for work performance?

Before you realized you wanted to be an entrepreneur, you worked for a company. Do you remember that sometimes, you got an immense pile of work, and you still got paid as if you worked at a normal, everyday rate?

With an incentive plan, that could be changed, and we think the employee’s performance can only get better if you make an incentive plan every now and then.

What is an incentive plan actually?

An incentive plan is a kind of a reward for employees that is focused on their constant contribution. Employee’s motivation is driven by purpose. That would mean that your workers appreciate the goal that you have set towards them, and they know that it is in favor of your consumers. Your employees work for the company’s and customers’ benefit. But everyone likes being rewarded now and then, right? Why not make it a habit of your company or a startup?

Are there any types of incentive plans?

Actually, there are three types of incentive plans:

  • Individual – that is concentrated on an individual’s work and performance
  • Group – which is mainly focused on the employees’ teamwork
  1. Are employees interdependent enough?
  2. Do they work together for the common goal?
  3. Are there any discipline slackers and how to deal with them?
  • Enterprise – concentrated mainly on interdependence on an organizational level

The goal of any incentive plan is finding top performers and making them stay on top. But at the same time, rewarding them for their performance! The goal of your organization should also be an employee effort, and you are going to reach that goal only by measuring their performance and showing them how much you appreciate the top performance that you get.

Is there anything you shouldn’t measure?

Actually yes! And if you make a mistake while measuring their performance, it could affect the work ethic in your company and compromise your employees.

Pay attention to these tips – you shouldn’t measure the performance based on:

  • Your personal impression on some person
  • On his/her previous work history
  • On his/her personal life

If it is a team performance you are measuring

  • It shouldn’t be concentrated on comparison of the teams

That doesn’t bring the positive team spirit, it can just bring bad impression and unhealthy fight for the sake of winning. Your incentive plan should focus on company’s goal and on the way those teams and those individuals are working towards the goal. Not how they are working against each other.

How should you present the incentive plan to the employees?

First of all, you should thoroughly explain what it is about. You should explain that it is the way they are getting paid for the performance they did in reaching certain goals. They should be involved in the whole process. Moreover:

  • The approach should be transparent (they should be informed about all the steps)
  • The goals should be measurable and reachable
  • The payout should be reasonable and measurable as well

You should promote the plan to let them know it is for their and company’s good. Make a proper presentation that will create excitement. You want employees to say:

“I can’t wait to start working on this”

That is what the healthy environment for the incentive plan should look like.

Please do contact us if you have any more questions, or comment in the field bellow. If you need mentoring or some sort of an advice, feel free to contact Casper Ravn-Sørensen, or read his blog for further information.