ten reasons incentive plans fail
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8/19/2019 Ten Reasons Incentive Plans Fail
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8/19/2019 Ten Reasons Incentive Plans Fail
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Competitive Advantage More i!e T"i#
$% Rea#on# In&entive Compen#ation '(an#)ai(B* Tom Kort + ,a#on Ba-mgarten '-.(i#"ed On/ Monda*0 ,-ne 10 2%$1 $$/%% AM
3inS"are
%Comment#
Get Risk Management In Your Inbox
T"e t"eor* .e"ind in&entive &ompen#ation i# mone* motivate# emp(o*ee# to per4orm 5e((6Un4ort-nate(*0 man* &ontra&tor# #pend a (ot o4 mone* on emp(o*ee in&entive# and re&eive(itt(e va(-e in ret-rn6
Emp(o*ee# ma* .e&ome angr* 5it" t"e &ompan* .e&a-#e t"eir o5n e7pe&tation# 4or.on-#e# are not met6 Mora(e i# "-rt 5"en emp(o*ee# 5or! "ard a(( *ear0 *et t"e pro4it# o4t"e &ompan* #ti(( (ag .e&a-#e emp(o*ee# are 5or!ing ine44i&ient(*6 Contra&tor# t"atgen-ine(* tr* to re5ard "ard85or!ing emp(o*ee# are 4r-#trated 5"en t"e* rea(i9e t"e*-nintentiona((* &reated a negative &ompan* atmo#p"ere6 Un4ort-nate(*0 t"i# i# 5"at man*&ompanie# 4a&e 5"en t"e* in&orre&t(* de#ign and imp(ement in&entive &ompen#ation p(an#6
Getting Employees to Do the Right Things Consistently
A #-&&e##4-( in&entive p(an m-#t 4o&-# on a&"ieving &ompan* goa(# .* driving t"e rig"t.e"avior# in emp(o*ee#6 )or in#tan&e0 i4 t"e .-#ine## aim# to #e&-re repeat .-#ine## and5or! #a4e(*0 t"e .on-# #*#tem #"o-(d &ompen#ate emp(o*ee# 4or good &-#tomer #ervi&e0#a4e 5or! pra&ti&e# and pro4ita.i(it*6 Bon-#e# .a#ed #o(e(* on pro:e&t and;or &ompan*pro4ita.i(it* do not drive important .e"avior# "i(e it ma* #eem &o-nterprod-&tive to 4o&-# on item# .e#ide# pro4it#0 4o&-#ing #o(e(* onpro4it# &an .e dangero-# to a &ompan*?# via.i(it*6
The Top 10 Reasons Incentive Plans Fail
S-.#&ri.e
http://enewsletters.constructionexec.com/riskmanagement/categories/competitive-advantage/http://enewsletters.constructionexec.com/riskmanagement/categories/competitive-advantage/http://enewsletters.constructionexec.com/riskmanagement/categories/competitive-advantage/http://enewsletters.constructionexec.com/riskmanagement/author/tom-kort/http://enewsletters.constructionexec.com/riskmanagement/author/jason-baumgarten/http://enewsletters.constructionexec.com/riskmanagement/categories/competitive-advantage/http://enewsletters.constructionexec.com/riskmanagement/categories/competitive-advantage/http://enewsletters.constructionexec.com/riskmanagement/author/tom-kort/http://enewsletters.constructionexec.com/riskmanagement/author/jason-baumgarten/
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8/19/2019 Ten Reasons Incentive Plans Fail
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T"e rea#on# in&entive# p(an#
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8/19/2019 Ten Reasons Incentive Plans Fail
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• a 9ero8in:-r* 5or!p(a&e
• pre8:o. p(anning
•
#"ort8interva( p(anning
• dai(* &re5 p(anning
• a .id8#e(e&tion pro&e##
• an e#timate8revie5 pro&e##
• a &"ange8order pro&e##
• po#t8:o. revie5#
• peop(e deve(opment and
• negotiated 5or!6
'. The Plan is Ine!!ective at Driving the Right %ehaviors
I4 .e#t pra&ti&e# are 5e(( de4ined .-t emp(o*ee# do not 4o((o5 t"em &on#i#tent(*0 it i# t"e#ame a# "aving no pro&e##e# at a((6 T"e -(timate goa( i# pro4ita.i(it* and providing an
ade-ate ret-rn on inve#tment to #"are"o(der#6 Un(e## t"e &ompan* "a# a mar!et ni&"e orper4orm# negotiated 5or! t"at provide# e7traordinar* pro4ita.i(it*0 t"e &ompan*?# .e#t&"an&e o4 #-&&e## &ome# 5"en it# peop(e/
• 5or! #a4e(*
• 5or! e44i&ient(* .* -#ing .e#t pra&ti&e#
• prod-&e -a(it* 5or!
•
#ati#4* &-#tomer#
• motivate #-.ordinate# and
• &omm-ni&ate 5e(( 5it" ot"er#6
(. The Company )as a Poor Employee Per!ormance*Evaluation Process
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8/19/2019 Ten Reasons Incentive Plans Fail
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T"e emp(o*ee eva(-ation pro&e## i# a pain4-( e7er&i#e in man* &ompanie#6 )ir#t0#-pervi#or# m-#t 5rite a #"ort #-mmar* o4 a #-.ordinate?# per4orman&e on #-.:e&tivei##-e# t"at o4ten in&(-de/
• :o. !no5(edge
• pro.(em #o(ving
• pro4e##iona(i#m
• motivation and
• intera&tion 5it" ot"er#6
T"e#e &riteria are #-.:e&tive and rat"er meaning(e## in driving t"e rig"t .e"avior# in
emp(o*ee#6 T"e per4orman&e metri 4or a &ontro((er ma* in&(-de t"e 4o((o5ing o.:e&tive
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8/19/2019 Ten Reasons Incentive Plans Fail
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T"e eva(-ation pro&e## #"o-(d tie in 5it" t"e in&entive &ompen#ation p(an6 T"e metriidenti4ied 4or ea&" po#ition #"o-(d .e meaning4-(6 Eva(-ation# are o4 (itt(e va(-e -n(e## t"e*are #imp(e to &reate and provide periodi& 4eed.a&!
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8/19/2019 Ten Reasons Incentive Plans Fail
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10. The Incentive Plan Itsel! Causes Division
T"ere i# a(5a*# #ome ten#ion .et5een e#timating and operation#6 Ho5ever0 5it" #omein&entive &ompen#ation program#0 5"en an e#timator (eave# #omet"ing o-t o4 t"e e#timate0it a44e&t# t"e pro:e&t team?# &ompen#ation0 adding to t"e ten#ion6 Additiona((*0 i4 4ie(dmanager# are moved on and o44 :o.#0 i##-e# a.o-t "o5 to #p(it .on-#e# ari#e .e&a-#eever*one 5i(( not agree on 5"o rea((* &ontri.-ted to t"e pro:e&t?# #-&&e##6
RELATED
CREATE AN E))ECTIVE INCENTIVE COM'ENSATION 'AN
THE E))ECTIVENESS O) INCENTIVE COM'ENSATION
GEOGRA'HIC E'ANSION AS A MARKET STRATEGY
http://enewsletters.constructionexec.com/riskmanagement/2013/06/create-an-effective-incentive-compensation-plan/http://enewsletters.constructionexec.com/riskmanagement/2013/06/effectiveness-of-incentive-compensation/http://enewsletters.constructionexec.com/riskmanagement/2015/01/geographic-expansion-as-a-market-strategy/http://enewsletters.constructionexec.com/riskmanagement/2013/06/create-an-effective-incentive-compensation-plan/http://enewsletters.constructionexec.com/riskmanagement/2013/06/effectiveness-of-incentive-compensation/http://enewsletters.constructionexec.com/riskmanagement/2015/01/geographic-expansion-as-a-market-strategy/
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8/19/2019 Ten Reasons Incentive Plans Fail
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Tom Kort
Tom Kort0 a(-mni o4 t"e )MI &on#-(tant team0 a##i#ted 5it" &ontent deve(opment6Conta&t/,a#on Ba-mgarten
,a#on Ba-mgarten0 i# a prin&ipa( 5it" )MI0 management &on#-(tant# to t"e engineering and&on#tr-&tion ind-#tr*0 and t"e 5e#tern &on#-(ting gro-p manager6 He #pe&ia(i9e# in #trategi&p(anning0 organi9ationa( deve(opment0 &"ange management and prod-&tivit* improvement&on#-(ting6 He ma* .e rea&"ed at $161262%$$ or .* e8mai( at :.a-mgarten4minet6&om6Conta&t/
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