Can Your Employees Make a Difference? What Does Your Incentive Plan Say?

What Does Your Incentive Plan Say

Can Your Employees Make a Difference? What Does Your Incentive Plan Say?

I am floored by how many times, during the design of an employee incentive plan, management will trot out the assumption/foregone conclusion that individual employees are unable to make a meaningful contribution to overall organization – or business unit – performance measures.  That there can be no possible line of sight between the work of rank and file employees and overall organizational metrics like revenues or net income.  And so, it logically follows, the only way to implement incentives for most of an organization’s population is to focus on individual performance measures, perhaps with a token (and low-weighted) nod to something at the organizational level.

When I push back on this tendency, I often get a response along the lines of: “Well, these people can’t make a difference in the organization’s bottom line.”

Really?  Then why are they there?

An incentive plan provides a terrific opportunity to focus employees – all of them – on doing the things in their respective jobs that help the organization successfully execute its most important objectives.  The management teams who have made this connection happen are those who are committed to ongoing conversations between each employee and his/her direct manager about what must happen, each day, for that employee to help impact the most important measures of organizational success.

Right down to the plant floor.   Like talking to assemblers about how they contribute to net income by reducing scrap.  Or talking to warehouse workers about how they contribute to overall productivity by reducing errors in the order picking process.  And so on.

Not long ago I was helping a mid-sized company design a new annual incentive plan for the top 6 or 7 executives reporting directly to the CEO.  The officer leading the effort suggested that we tie 50% of each executive’s award to their individual performance goals, because “they can’t, individually, really have much of an impact on overall company performance.”

I’m sorry, but what?  The top executives in the company can’t impact overall company performance?

The issue here is obviously deeper and wider than incentive plan design, but the plan design process has a tendency to bring it forward and lay it into our laps.  How can an organization hope to achieve its overall goals when it is enveloped in the sense that nobody working there can really make a difference?

Talk about your self-fulfilling prophecy.

Creative Commons image “Ben Frowns” by Pierre Derrick