Advice on implementing bonus plans

IMPLEMENTATION

Advice on implementing bonus plans

Before forging ahead with a new incentive plan stop and take a look at the implementation process - your programme's success depends on it, according to a study published by the US reward association WorldatWork.

Introducing a new incentive programme represents a formidable challenge. It's a complex process requiring considerable commitment in terms of resources - time, energy, expertise and money.

So, why are new incentive plans not always a resounding success? Beth Burkholder, a managing consultant at Towers Perrin in the US, reckons that execution is much more critical than design.

Writing in the August issue of Workspan, she concludes that all too many incentive plans fail because they are poorly implemented - not because of shoddy plan design.

Five organisational change management levers

There are several strategies and tactics for improving implementation, concludes Towers Perrin's Beth Burkholder in this six-page Workspan article:

1. Leadership

  • Provide vision of a successful implementation.
  • Act as project and implementation champions.

"By showing strong leadership throughout the design and roll-out, employees will understand this plan is not optional," says Burkholder.

2. Involvement

  • Foster buy-in and commitment through employee involvement in the process.

Your design team needs broad-based representation including line management, HR, finance, IT, payroll and representatives from specific functions that may be affected, says Burkholder. "Allowing involvement will let people feel that their voices are heard."

3. Technology

  • Develop supporting structures for accurate goal setting.
  • Ensure the ability to generate accurate reports and pay-outs.

"Solid technology will support the plan, including accessing baseline data for goal setting and generating regular performance reports throughout the plan year - not to mention calculating pay-outs accurately and on time," says Burkholder.

4. Communication

  • Give clear and consistent messages throughout the process.
  • Roll-out clear and comprehensive plan documentation.

Communication is vital. "Participants need to hear what the new plans will involve, what the changes are and why this will benefit them. Next, they need time to absorb and ask questions. Then the plan should be explained again - this time in more detail."

5. Measurement

  • Provide feedback to participants on their performance.
  • Ensure plans are meeting stated objectives, and course-correct as necessary.

As Burkholder concludes: "Monitoring the plan ensure it functions as intended, lets participants know how they are doing, and gauges the impact plans have had against stated objectives."

Source: "Orchestrating a finely-tuned incentive plan", by Beth Burkholder, Workspan, August 2002.

A final word

"For best results, incentive plans with a pay-out calculation methodology should follow a few general standards: 90% of participants should earn some money under the plan 50% to 60% of participants should hit their goal 10% of participants should reach the excellence level that has been set." - Beth Burkholder, Towers Perrin.

Want to know more?

Title: "Orchestrating a finely-tuned incentive plan", by Beth Burkholder, Workspan, August 2002.

Availability: Contact WorldatWork, 14040 N. Northsight Blvd, Scottsdale, Arizona, USA AZ 85260, tel: 001 480 951 9191 or email: workspan@worldatwork.org.

For further details about WorldatWork visit www.worldatwork.org

2 December 2002