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Aligning Incentives with Objectives

Source: bryansbizblog.com

Do you spend time analyzing if the outcomes you want to achieve are supported by the incentives you create in your organization? Do you know if you have created the incorrect incentives to achieve the outcomes you desire? Sometimes we support behaviors we should not support, while ignoring the very behaviors we would like to increase in our employees.

I have observed, or been a part of organizations which would have been well served to look more closely at how they were managing and compensating their employees based upon their stated goals for the organization. These organizations were not doing anything ‘wrong’ legally, ethically or professionally. However, they were also not aligning their ‘incentives’ or ‘disincentives’ with their intended outcomes.

In the area of compensation, often times owners and managers create bonus or incentive pay to increase sales, customer service or certain levels of efficiencies within the business. They do this while attempting to establish a ‘team approach’ to serving their customers or clients. Individual bonuses are not aligned with, nor do they necessarily support, team work. An individual incentive, dependent on individual performance is the antithesis of supporting team work in the truest sense. If the business desires a true and effective team approach the compensation plan must be designed to motivate, incentivize and reward those behaviors vital to good team performance. A team or organization-wide incentive pay system which rewards the entire team or set of teams for meeting specific goals is much more likely to produce the results the business desires.

In the area of policies/procedures, do you incentivize employees to ‘self-report’ errors so they can be identified and addressed or do your employees fear disciplinary action or a poor review should they be found to have made a major mistake? If you value finding, addressing and correcting errors which impact customers/clients, your performance management system must support self-reporting, rather than punishing it.

Having an outside observer review your ‘incentives’ as they relate to your ‘objectives’ may create a more effective system which will drive better results in the organization. Many of us ‘miss the forest for the trees’ and having an outside consultant ‘looking at the trees and the forest’ provides an opportunity to better understand your organizations’ alignment of incentives and outcomes.

Weekly postings on management and organizational issues for both businesses and non-profits from Bryan Nelson of Vista Management Solutions.

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