Elements of Well-Designed Incentive Plans
Below are the elements of well-designed plans (based on our experience) that we design into our clients’ plans:
■ They are self-funding, and they ensure financial and value enhancements to the business.
■ They have perceived value.
■ They have shared targets.
■ The goals are understandable.
■ The goals are a stretch, but attainable.
■ They clearly align employee behavior to business objectives.
SELF-FUNDING
From a financial perspective, the most important aspect of an incentive plan is that it pay for itself and that it add value to the organization. If you base your plan on PBT, you must first determine a minimum acceptable threshold of PBT before which no incentive will be paid. A common retort I get ...
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