HOW TO CREATE A BETTER INCENTIVE PLAN TO KEEP STAFF IN A POST-PANDEMIC WORLD
We are living through a time of real significant change, the ability to recruit and engage a new work force whilst retaining great staff is starting to rear its ugly head. Whilst the concept of offering additional pay for a job well done is not entirely new, still many employers struggle to develop the long term incentive plans and actually deliver tangible benefits.
A well-designed bonus plan and career strategy that is properly delivered can deliver a higher retention rate, improved performance, motivate and engage colleagues which ultimately leads to a better performing business with a great reputation.
Here are three considerations we feel are key to success:
Avoid Making it Complicated
Our experience shows us that the more complex the plan is, the more the average participant will discount the potential pay-out, and there will be less levels of motivation and engagement. Simplicity allows the plan to be more easily understood, thus enhancing the positive impact on mindset. It also reduces the administration and reporting work and cost burden on the organisation in terms of supporting the plan. Finally, it’s important to do your benchmarking and ensure that the levels of variable pay on offer are both market related and fair.
Ensure the Level of Risk-Sharing is Appropriate
One of the features of a good incentive plan is that it appropriately shares risk between the participants and the organisation. This allows the organisation to reduce the total cost of employment in periods when performance is lacklustre. However, the temptation, in our experience, is to overshare the risk, especially at lower levels within the organisation, and especially in markets that are already quite volatile. A plan with a catch-all performance gateway might be inappropriate for levels of work below senior management and will ultimately lead to disengagement and lack of motivation, especially in tough years, when the extra work and effort will ensure the preservation of value for shareholders and should still be rewarded.
Spend Sufficient Resources on Implementation
Reward practitioners often work towards the goal of designing and then getting approval for the bonus plan. But this is unfortunately only half the battle. A good design can often be completely undone when not enough time and resource is spent on the implementation. Communication, branding, education, Q&A forums and a variety of other implementation support options will ensure the plan is properly understood and well received. Without this, the positive impact can be severely blunted, leading to a situation where a good design today is seen as a ‘bad’ bonus plan by large parts of the organisation in the near future.
I believe should these key areas be adequately addressed, your organization will be in a much stronger position for success, staff will be far more engaged retaining good staff that let’s face it are the key drivers of the business, incentive plans have never been more important as organisations fight to survive and continue to grow in the post-pandemic world.