The Upside Of Incentive Compensation Plans
by JoAnne Berg
Originally published by American Express OPEN Forum on Mar 24, 2011
Incentive compensation is a practice by which employers pay their employees extra for performance “beyond normal expectations.”
This is one of those practices that business owners have had widely varying experiences with. Sometimes incentive compensation plans work well and
benefit both the company and the employees; sometimes they have no effect; and sometimes these compensation plans are a partial, or even total, disaster.
The concept behind these plans is fairly simple. When they work well, incentive compensation plans can create an increase in employee motivation and productivity, which can lead to improved profitability.
But when incentive comp plans don’t work well, they can actually create all sorts of problems. One of the worst things that happens is that employees can inadvertently be motivated to make decisions that are actually harmful to the company in order to increase their own pay. So what makes the difference between a good plan and a bad plan? It usually comes down to plan design.
Read the rest of the article on OPEN Forum here.
