Motivating employees and influencing performance through incentives or profit share is increasingly common but frequently ineffective - not because incentives are a bad idea, but usually because businesses choose incentives which reward the wrong behaviours.
Businesses are increasing focus on remuneration strategies in response to the near-full employment conditions in the Australian economy and the resultant increased pressure on fixed cost bases. The opportunity created by incentives is simple in its philosophy: to grow the total size of the pie available and share it according to who created the outcomes. So why do so many businesses get it wrong?
- Many incentive schemes over or under reward employees. Either way, employees become disengaged from the direct effect of their actions on their own remuneration: the effort required is either too great or too little to be sustainable, and their actions no longer influence the size of the pie.
- Misidentification of the true value drivers of the business, and therefore motivating behaviours that don’t add value to the business.
- Aligning rewards with uncontrollable areas of the business. Remuneration should always be based on elements of the business employees can influence.
The true value of a well-structured incentive program is capturing incremental business growth by aligning employee efforts with business goals. In order to do this properly, businesses must think critically through the process: a well structured incentive program is invaluable for long term business growth.
27-Aug-2008