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Red card : 5 examples of incentive compensation wrongly designed that will go to disaster

Red card : 5 examples of incentive compensation wrongly designed that will go to disaster
March 05, 2019

Best incentive compensation practices

The most common mistakes to avoid in terms of business efficiency not to start wrongly in the definition of an incentive compensation plan. Be careful, these small mistakes will make the difference in the field.

 

EXAMPLE 1: PAYING Messi FOR 15 GOALS BY SEASON IS IMPRODUCTIVE

You take the best. Do not let them fall asleep! Lionel Messi targetWhy limit their remuneration with objectives too easily achieved? Your teams have the right to have a challenge to match their skills, as well as your expectations.

"Whoever has no goals will not reach them," said Sun Tzu.

Raise the bar. If Messi can score 40 goals in the season, set him goals to match his skills!

Of course, it is not enough to declare an ambitious goal. We must also focus on the "how" rather than the only result. This means offering your champions a quick and consistent action plan. Your role as a team leader is to successfully define the key means and indicators so that they can quickly arbitrate between their different tasks to reach the ultimate goal.

 

The 10 golden rules of incentive compensation Find out the incentive  compensation white paper gathering best practices and pitfalls to avoid to set  up incentive compensation plans  Download

 

EXAMPLE 2: FORGETTING THE SUBSTITUTES, A HUGE MISTAKE!

You most certainly have very good players in your team and less good ones. To the first, actions noticed, praise and superb olas. The others can applaud and hope not to act as fans for too long. It is certainly important to stimulate your teams to become better by differentiating their success by awarding bonuses. But removing them from the game, without objectives or incentive compensation, a substantial part of your team is dangerous for their motivation and turnover.

A good incentive compensation system must be able to bring the maximum of your employees to the performance. First, your results are not based on too few players. Think about this to adapt the selectivity of your incentive scheme, so that it does not make too many losers. Then because, as for a football game, the success goes through the game of the entire team. It can be interesting to add to your individual bonus some collective bonuses to create collaborative behaviors.

 

EXAMPLE 3: PRIVILEGE THE NUMBER OF SUCCESSFUL PASSES TO MARKED GOALS, CHOOSE THE OBJECTIVES THAT COUNT!

Your objectives are the reflection of the company's strategy. When you draw up activity indicators to measure the performance of your team, be careful when choosing them. What is really important to you and will directly impact your business? Do not scatter too many criteria, your players can no longer prioritize. It is essential to reduce the performance to economic criteria AND in line with the real success of the company!

 

EXAMPLE 4: REFUSING TO SEE ITS PLAYERS BETTER PAID THAN THE TOP MANAGERS, AN ERROR?

Should we remove the upper limit for the incentive compensation plan of your sales representatives? The commission without ceiling, on the principle "more I sell more I earn" can be an incredible source of motivation for your teams and especially for your best elements that have a well-established customer portfolio often renewing their orders. In fact, choosing the cap, allows you to limit the impact of external factors that do not directly depend on the performance of your teams. The cap of the variable compensation plan is not necessarily harmful but it should not be a stopper for the performance of your great champions. Choose for a commissioned part and a quantified part in your scheme with the possibility of correctly evaluating the potential of each of your stars, no doubt that you will know how to set the right objectives.

 

EXAMPLE 5: DO NOT COACH AND LEAVE YOUR TEAM ALONE

Your teams need a good coach who shows them the way, motivates the most recalcitrant minds, injects the spirit of victory.

We have designed a motivational wheel that describes step by step the 5 essential steps to make your sales forces performing. The first of these is knowing how to set realistic objectives in order not to demotivate them from the beginning. Then to know how to communicate well. In order to easily communicate to your teams around their compensation, our tool allows each of your employees to have access at any time to his personal page with his incentive compensation and the possibility of simulating future earnings. Stimulate the calculating spirit of your teams!

 

The 10 golden rules of incentive compensation  Optimize your incentive compensation plans with this exclusive content white  paper.  Download

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The 10 golden rules of incentive compensation

Find out the incentive compensation white paper gathering best practices and pitfalls to avoid to set up incentive compensation plans
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Download

Blog post author

Hervé de Riberolles

For more than ten years, I have been leading a number of projects for our customers to diagnose and re design the incentive compensation systems of their teams. The diversity of environments (sectors, countries, populations) that we face, my team and myself, requires a perpetual adaptation of our methods and our offer. The motivation of employees is, from my point of view, exciting, constantly evolving and at the crossroads of several areas of expertise. That's what makes it so interesting.

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