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Employers urged to customise bonuses to meet needs of organisation

REWARDING PERFORMANCE

Employers urged to customise bonuses to meet needs of organisation

There is a real danger that the recent history of merit pay — one of the most controversial and confusing episodes in UK reward policy — is about to be repeated with bonus and incentive schemes. Excessive hype and exaggerated claims, followed by rapid expansion and copy-cat introduction, leading inevitably to failure to live up to the huge expectations, ending in disillusionment and rejection. That is the stark warning to emerge from a new study by the Chartered Institute of Personnel and Development.

A well-designed and operated bonus or incentive scheme can indeed have a positive effect on organisational performance and staff motivation, according to Duncan Brown, the CIPD’ s new assistant director general and one of the UK’ s most renowned reward experts. But as he points out: Discussions about performance pay seem to be invariably shrouded in extremist and over-simplistic views, hype and controversy, which prevents a rational consideration of the topic.

In my 20 years of employment we appear to have somersaulted in the UK from limited usage and general disdain and hostility (‘ incentives, ugh, that’ s what salespeople have!’ ), to the current situation of expansion — and the adulation of Chancellors and chief executives.

There’ s no one-size-fits all

Brown’ s central thesis is that that there is no "one-size-fits-all" approach to bonus schemes. He urges employers to remember that local tailoring to your own needs and circumstances is perhaps the most critical ingredient for success.

So, what are the key overriding considerations you need to make before choosing which scheme or schemes are most appropriate for your organisation? Brown offers these four golden rules for rethinking bonuses and incentives:

  • ensure that the schemes are part of a wider, integrated approach to reward and HR
  • align your incentive plans with the structure of your organisation
  • ensuring effective performance management including appropriate target-setting
  • communicate, involve and gain the support of your staff.

What you will find in this CIPD guide

Spread across 53 pages, Duncan Brown offers a realistic and practical assessment of current thinking in the area:

  • What is happening in the bonus and incentive field and why.
  • The main reasons for using incentives (to improve business performance and strengthen the links between individual performance and corporate results).
  • The major types of schemes that are emerging in the UK today. And drawing together a comprehensive set of findings, an assessment of the pros and cons of different schemes.
  • Research on their effectiveness and the key overriding considerations that you need to make in determining whether to use them and how to make them work in your organisation
  • Case studies of bonuses in action at Abbey National, Lafarge Blue Circle, and a European software company.
  • A step-by-step guide to introducing and managing a scheme.

Terminology: This guide is about bonus and incentive schemes, that is pay plans that offer cash lump sums to employees in relation to some aspect of their individual and/or collective performance.

It does not consider merit schemes or recognition programmes, nor does it examine incentives for specific groups — for example executives, sales staff or call centre employees.

 

A final word

"The guide illustrates how an intensive examination of pay structures leads to higher staff motivation and better business results. I would stress however that bonus and incentives plans should be consistent with the structure and ethic of your team and organisation. — Duncan Brown, assistant director general, Chartered Institute of Personnel and Development.

Want to know more?

Title: Guide to Bonus and Incentive Plans, Duncan Brown, Chartered Institute of Personnel and Development.

Availability: The CIPD guide is available from Plymbridge Distributors, tel: 01752 202301. Please quote ISBN: 0852929552.

For a list of all titles by the Chartered Institute of Personnel and Development visit the CIPD web site . . .

Posted 6 June 2002