Thursday, February 18, 2010
If incentives, rewards, bonuses, and variable compensation forms of remuneration have the ability to change and shape employee behavior and direct it towards higher levels of productivity, what role does the employee play? Technically, the employee’s role is that of the vehicle with which the desired outcomes are achieved. However, to achieve those desire outcomes the employee has to have both the ability and capacity to carry out the actions that will result in goal attainment. No level of incentive will entice the employee who lacks the ability to design a circuit board to build a defect free board. A variable compensation plan will not yield higher sales if there are an insufficient number of sales leads.
To be effective, an incentive plan design must allow a degree of control by the employee. Furthermore, the employee has to be able to recognize that he has the ability to control those aspects of the plan that will allow him to achieve the target goal. Employees in jobs that are traditionally incented are accustomed to recognizing their degree of control. However, non-traditional jobs will require a significant amount employee communications. A large portion of implementing successful incentive plans is employee communications and the building of trust. After all, you are dealing with the employee’s livelihood.
At a large bank I worked at, new accounts representatives where able to earn $50 for each new checking account they opened from a new banking customer. There was no limit placed on the amount that could be paid to any given new accounts person within any period. There was no need to place any limits since the employee had very little control over how many new accounts could be opened. Representatives were not out canvassing the malls for new accounts; they only had access to those new customers who walked into their branch office. Later we added cross selling features where the representatives had the ability to sell safety deposit boxes, savings accounts, ATM/Debit cards, and other “products”. Once this change was in place we saw a significant increase in the number and types of products sold. Although the number of new customers did not increase, but what did change was the average number of products sold per new account. We allowed more control for the new account representatives over the desired outcomes of increased sales.
When working for a mutual insurance company, we wanted to increase the number of employees who achieved various levels of actuarial designations and to move up to the next successive designation. Actuarial candidates were allowed time off with pay to study for the exam, they were assigned a “mentor” to help prepare for the exam, and they were allowed paid time off to actually take the exam, and they had their base pay increased by $100 per month for each exam they successfully passed. Contrary to what you might think, some allocated slots for actuarial candidates went unfilled, however, we were able to attract and retain the desired number of actuarial candidates into the program. Actuarial candidates were able to control the outcomes with the features of the plan, e.g., study time and mentoring.
Clearly, the employee engaged in an incentive plan must perceive that they can have some control or influence over the outcome or the employee will not be motivated to take action to achieve the target. In addition, as we know, motivation is what is going to direct and shape the employee’s behavior towards the desired outcome.
If incentives, rewards, bonuses, and variable compensation forms of remuneration have the ability to change and shape employee behavior and direct it towards higher levels of productivity, what role does the employee play? Technically, the employee’s role is that of the vehicle with which the desired outcomes are achieved. However, to achieve those desire outcomes the employee has to have both the ability and capacity to carry out the actions that will result in goal attainment. No level of incentive will entice the employee who lacks the ability to design a circuit board to build a defect free board. A variable compensation plan will not yield higher sales if there are an insufficient number of sales leads.
To be effective, an incentive plan design must allow a degree of control by the employee. Furthermore, the employee has to be able to recognize that he has the ability to control those aspects of the plan that will allow him to achieve the target goal. Employees in jobs that are traditionally incented are accustomed to recognizing their degree of control. However, non-traditional jobs will require a significant amount employee communications. A large portion of implementing successful incentive plans is employee communications and the building of trust. After all, you are dealing with the employee’s livelihood.
At a large bank I worked at, new accounts representatives where able to earn $50 for each new checking account they opened from a new banking customer. There was no limit placed on the amount that could be paid to any given new accounts person within any period. There was no need to place any limits since the employee had very little control over how many new accounts could be opened. Representatives were not out canvassing the malls for new accounts; they only had access to those new customers who walked into their branch office. Later we added cross selling features where the representatives had the ability to sell safety deposit boxes, savings accounts, ATM/Debit cards, and other “products”. Once this change was in place we saw a significant increase in the number and types of products sold. Although the number of new customers did not increase, but what did change was the average number of products sold per new account. We allowed more control for the new account representatives over the desired outcomes of increased sales.
When working for a mutual insurance company, we wanted to increase the number of employees who achieved various levels of actuarial designations and to move up to the next successive designation. Actuarial candidates were allowed time off with pay to study for the exam, they were assigned a “mentor” to help prepare for the exam, and they were allowed paid time off to actually take the exam, and they had their base pay increased by $100 per month for each exam they successfully passed. Contrary to what you might think, some allocated slots for actuarial candidates went unfilled, however, we were able to attract and retain the desired number of actuarial candidates into the program. Actuarial candidates were able to control the outcomes with the features of the plan, e.g., study time and mentoring.
Clearly, the employee engaged in an incentive plan must perceive that they can have some control or influence over the outcome or the employee will not be motivated to take action to achieve the target. In addition, as we know, motivation is what is going to direct and shape the employee’s behavior towards the desired outcome.
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