Evaluating the Effectiveness of Incentive Compensation

Maintaining morale is crucial to keeping your employees motivated to work hard regardless of the industry your business is in. Due to this, businesses are beginning to adopt incentive schemes to help their businesses succeed. In addition to motivating workers to attain set goals, they challenge them to achieve even more. This motivation leads to company success. Employees must see a clear link between incentives and performance to make incentive plans work effectively. 

We’re here to help you evaluate incentive pay’s effectiveness instead of figuring it out alone. Please read on:

1) Strengthen Work Relationships: 

Employees build camaraderie by working together on team incentive plans and pulling together for a common goal. It can strengthen bonds between colleagues, managers, and business owners. Having a unified workforce increases efficiency and creates a pleasant work environment. Furthermore, it can enhance regular work relationships between departments and coworkers, increasing productivity.

2) Greater Sense of Loyalty to the Company: 

It is more likely that employees who can positively impact their earning potential will be loyal to the company they represent. In particular, this applies to incentive plans with residual value. The longevity of the professional relationship becomes an advantage to both the employee and the employer.

3) Lower Staff Turnover: 

Undercompensated or unappreciated employees often seek new employment opportunities. The purpose of incentive plans is to reward top-performing employees and show them your appreciation for their work. The employer benefits from reduced turnover and time and money savings in recruiting new employees. 

4) Help attract new talent: 

The Glassdoor survey found that 57% of candidates ranked incentives as one of their top considerations when applying for a job. Offering unique incentive schemes could help you stand out from the competition and attract top candidates. An employer’s reputation could lead to a candidate choosing your company over another.

5) Build Team Culture: 

A study found that organizations with connected employees improve productivity by 20-25%. It can be helpful to strengthen relationships between your employees if you offer incentives or things that multiple people can win or attend. Colleagues should be encouraged to nominate each other for rewards since it shows respect for each other’s opinions.

6) Minimal Risk on Your End: 

From an employer’s perspective, the main advantage of incentive pay structures is that employees don’t receive additional pay until they meet a specific target. Then, instead of hiring a salesperson for $100K and hoping they will perform as well as they promise, you can hire them for $35K and pay them generous commissions. Altogether, the incentive pay system is flexible and can be designed to fit the company’s current business strategy.

Conclusion:

Whenever you ask, is incentive pay right for my business? The answer isn’t one-size-fits-all. Certain businesses can benefit greatly from incentive pay, driving productivity and performance, while at another company, the same pay structure can have the opposite effect. It is ultimately up to your organization to decide whether incentive pay is right for them.

Looking for incentive management software? With Infinigent’s Incentive management software, you can automate your incentive process, calculate large volumes of data & adjust compensation modes.