I had a great discussion today with a CEO group that I was invited to speak to about employee incentives; we talked about the manner in which an incentive plan and a recognition program can really complement each other. I wanted to share a bit of that conversation here.
This group of executives was particularly interested in the topic of broad-based group incentive plans. I am a passionate fan of these plans as I believe that, when designed and implemented well, they provide a great vehicle for creating -- and then sharing -- the rewards of organizational success. While incentive plans can certainly be, and often are, designed with a combination of individual and group performance measures, the most classic and popular broad-based design features a structure by which employees work together to impact a group performance measure (such as profit or net income), and then all are rewarded when they collectively reach that goal.
The objection that is frequently raised to to this classic group incentive plan structure is that it doesn't provide a way to single out and reward the exceptional individual. This objection is well-founded, this is not the purpose of a group incentive plan. That's where a recognition program can enter the picture in a complementary way. A recognition program (and I define recognition as "rewards, cash or non-cash and typically smaller than incentive awards in value, which are delivered after-the-fact to reinforce valued outcomes"; think movie tickets, spot bonuses or gift certificates) can provide you with a vehicle to celebrate and reward the accomplishments and contributions, to complement the "all or none" nature of the group incentive plan. Of course, most merit increase programs (to the extent that they are functioning well) are designed to reward individual performance as well.
I encouraged this group to think of their "reward program" (or "total compensation package") as a portfolio of different plans. Each plan element (like, for example, a group incentive plan) should serve a particular purpose in service of the overall "attract, retain, motivate" objective that complements, but doesn't overlap with, the other plan elements. A "balanced" portfolio, so to speak. In fact, taking the balanced portfolio approach to analyzing and reviewing a reward program can be helpful in picking out any "gaps" or "double dipping" that may suggest we are not spending our reward dollars in the most effective way.
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