Innovation and Success in Incentive Pay

There is a "golden rule" that I have often heard referenced with respect to the development of incentive compensation plans and since my own experience (and the research I have seen) in this area confirms its truth, I tend to use it regularly.  It is:

Success = 20% Design and 80% Implementation

What it means is this:  While it is certainly important to design an incentive or bonus plan well, the ultimate success of the plan in producing results for your organization will rest largely with how well you implement it.  Implementation comes down to education and communication, and employee line of sight.  Do the people participating in the plan understand its purpose and how it works?  Do they understand what must happen in order for them to earn an award?  Do they realize what they must do, when they walk in the door each and every day, to make an impact on plan measures?  Organizations that make absolutely sure people have this information are the organizations that I see having real success with an incentive plan.

What does this have to do with innovation in incentive plans?  A lot, I think.  I am always asked, when presenting to groups and in conversations with my clients, about the most "innovative incentive designs" that I have seen recently.  Frankly, I think the question is a bit misguided.  In my experience, the best incentive plans are the most simple and straightforward ones; what makes them great is the innovative and creative communication and education that surrounds them.  These innovations can come in many forms, including:

• Creating opportunities and support for good conversation about the incentive plan, the plan measures, and the day-to-day work and activities of employees.  These conversations can be, and often are, simply between employees and their supervisors - but sometimes there are also opportunities for discussion between small groups of employees and senior organizational leaders which can be particularly powerful.
• Using the Company intranet to post and update communication and information about the incentive plan, and performance against plan measures to date.  These performance updates are made quarterly, monthly or - sometimes - even weekly, so that employees can track how things are going.
• Using web tools like web conferencing to provide incentive plan communication and updates to employees, particularly those that are in field and remote locations.

Comments

[Paul Hebert]

Here! Here! Innovative doesn't always equal effective. Sometimes in our desire to do something different we forget that the real goal is to do something that gets results. The client should be asking, "what incentive plans will get me the best results" not what is innovative.

While I believe in experimenting in order to find the next "best" solution given the changing business environment we cannot overlook the real issue - results.

Unfortunately, when I hear "what is the most innovative" I think they are really asking "what plan will require the least work." Everyone is looking for a magic bullet.

There is an old saying that any plan will work if you work the plan. Too many people want to have a plan with little work. Implementation is always overlooked - remember 10% inspiration, 90% perspiration.

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AB - Thanks for the comments, Paul. Sounds like we've had a lot of parallel experiences! There are always those seeking the magic bullet and too often they think that incentives are an easy way to results. When that proves not to be true, they blame the incentive plans ("if only we could come up with a more innovative plan design!").