Employee Incentive Scheme

What does it take to introduce a successful employee incentivisation scheme? Lots of thought and understanding, supported by good systems and processes.

Generally, we see three basic types of scheme:

  1. Company-wide – There is a single metric where everyone is rewarded based on the result. For example, if £100k net profit is achieved a bonus of 10% will be paid. A nice and simple system but can cause resentment as some employees work harder than others and feel they should be compensated accordingly.
  2. Individual – Each employee is set specific performance targets and reward is based on how well they deliver against them. Good for addressing the balance between ‘hard workers’ and ‘free riders’ but is fraught with dangers of misalignment and inadvertently causing people to work against each other’s goal. In one organisation we worked with, this was reflected by storemen disposing of perfectly good stock (as their target was based on stock value), only for the purchasing team to re-order it (as their goal was to maintain stock levels)!
  3. Combination – A combination of 1 and 2 where part of the reward is company wide and part is individual based.

We have worked with many companies to introduce or re-invigorate employee incentive schemes. While doing this work we have built up a lot of experience on what works well and what doesn’t work so well! The fact is, people are different, so it is important your scheme matches the people you have. For this reason, it is difficult to copy another companies success. However, there are several principles which we have recognised as being at the core of all successful schemes, no matter what industry.

Here are our top three tips to help make your scheme a success:

1. Alignment

A good scheme ensures everyone in the organisation works toward the same company goal. Each department, and each person in that department, has their own unique role, but they all need to work in perfect harmony to deliver the companies objectives. With ‘silo mentality’ being prevalent in most organisations, introducing a scheme which sets and rewards individuals for specific targets means you have to be extremely careful peoples objectives do not conflict. If they do, you will see behaviours which you could never have anticipated!

2. Simplicity

A good reward system is easy to administer, track and evaluate. One which is aligned to the values of the organisation and encourages decisions to be made based on those principles, always works well.

3. Process Driven

Shigeo Shingo said it best, “do not underestimate the importance of good systems to drive good behaviours”. Ensure the processes you establish encourage the right behaviours. View them as handrails which guide people to behave in a desired way.

Good luck with your scheme!

If you would like any advice, help or support with your employee incentive scheme, or you just want to let us know how yours is performing, please get in touch (Tel: 02920 351 502). We would be happy to help.


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