FOCUS TODAY - August 2002

Management Incentives

Harvey M. Weiner, President
Search America, Dallas, TX

Management incentives become increasingly important in competitive times.  Effective incentive programs should enhance individual and collective performance while recognizing exceptional achievement.  Effective management strategies:

• Are realistically attainable however difficult.  Don�t establish impossible, frivolous, or just �nice-to-have� goals.  Incentives must focus on something everyone agrees is important.

• Clearly define goals, both short- and long-term.

• Establish dates by which accomplishment will be evaluated.

• Leave nothing to the board�s discretion.�  Discretionary incentives are undignified, like tossing a tip to management, and are frequently based on either the most recent or most memorable individual events rather than sustained, constructive accomplishment.

• Pay off within a reasonable time following close of the accomplishment period. An effective reward closely tracks the success on which it was predicated. Accomplishments have a way of quickly becoming �the new normal,� no longer worthy of a bonus in the eyes of those who have forgotten the way it was, or who was responsible for the improvement.  Imagine being thanked for something you did six months ago.

• Do nothing to jeopardize trust between the parties.  If it�s earned, pay up.

• Pay off only for supplemental financial results or other quantifiable improvement.

• Make sense to all participants, including those who do not qualify for a payout.

• Are easily explained in 30 seconds or less, absolutely no more than a single page.

• Avoid creating divisiveness between employees.  Competition can be healthy. Cooperating toward a common goal is productive.  Be fair.  Be sure that all those responsible for change also share in the reward.
  
• Recognize that envy is destructive.  If two teams compete have a first and second prize but never reward lack of effort.

• Provide ongoing feedback.
  
• Provide incremental payouts as milestones are reached.
  
• Encourage improvement.

• Move the goalpost after each incentive period is closed.

• Provide an incentive of value.

• Avoid paying group incentives to everyone, even those tangentially involved. You will disappoint and lose your best individual producers, retaining only the mediocre.

Harvey M. Weiner, Search America
Phone: 972-233-3302 � Fax: 972-233-1518
e-mail: [email protected]