I've had the priviledge of seeing a lot of bonus and incentive plans in action. I've been involved in front-end design, mid-course correction and what can only be described as the post-mortem stage. I like to think it's given me the chance to see the good, the bad and the ugly (in some cases, the really ugly). And offered me a helpful education.
And in a few special cases, it has convinced me that variable pay - under the right circumstances - can transform an organization. As I reflect on these cases in particular, one lesson stands out.
Incentive pay that performs, really performs, requires a marathon, not a sprint.
It requires careful design up front, a best effort to capture both immediate and enduring strategic priorities. Not too complex or too simple. Consideration of potential impact and consequences. In the same way that running a marathon requires careful planning and preparation.
It demands a relentless commitment to continuous review and improvement; assessing how the last plan year went, nudging to make the next plan year better, rechecking against shifts in strategy or priorities. Because if it's a marathon and not a sprint, you want to pace yourself, taking steps and making changes at a rate that the organization is able to digest them. Positioning for success in the long run.
If we're hoping for a significant and sustained impact, we must appreciate that it takes a few years for leaders, managers and employees to get their respective heads around the paradigm that the incentive plan is pushing, to nudge process and decision making so that they are aligned with plan drivers. It takes a few years for the plan to become embedded in the work environment and for the necessary information sharing and education to become routine and habitual.
Too few organizations are prepared to devote themselves to the marathon. Too many will run a sprint or two, then either write off incentives as a waste of time or go chasing the next short-term miracle du jour.
But I have seen what's possible.
Image: Creative Commons Photo "20101106_Marathon_0270" by Grand Canyon NPS