Incentive Compensation Plans Improve Motivation Levels of Employees

Currently every successful business on the face of the planet focuses widely on the development of its human resource. Human resource is one of the most important components of an organization. Workers in an organization need to be well-motivated towards their work as this is one of the most important conditions that needs to be met in order for a business to earn profits. The human resources department in a firm constantly caters for the welfare and wellbeing of its employees as this encourages loyalty and satisfaction among its workforce. A satisfied workforce means greater performance and efficiency which results in higher profits for the firm.
A great challenge for the management is to compensate their employees effectively. Incentive compensation plans are doing with allotting bonuses and rewards to the employees/departments in a business that have been reaching their goals effectively. These bonuses and rewards can either be in the form of financial increments or fringed benefits/perks like automobiles, cell phones, etc.
Every small/medium sized growing business dreams of an effective compensation management system as only large well-established businesses are able to afford this perk. On the other hand, large businesses make sure they have effective incentive compensation plans in order to attract people to work for them and also to make their existing workforce feel committed to its responsibilities towards the company to work professionally.
If you are seeking to establish a good incentive compensation plan, then there are only three things you need to do.

  • Every employee must be included in the compensation plan
  • Do not over complicate it
  • And, make your dealings fair

Most managers assume that incentive compensation is only to be given to sales personnel or employees who have direct contact with the customers. However, that is not how you should be looking at it. Imagine the effect on your client imposed by the receptionist giving him/her a smile at the front desk, or the security guard greeting him/her with a simple, “welcome”. Every employee in an organization has a direct or indirect effect on the customer’s judgment of the product/service that a firm is selling.
Therefore, everybody should be included in the incentive compensation program. The incentive compensation plan provides the employees with an ownership experience. As their performance is directly linked to the growth of the organization, they will feel more committed to their work, looking forward to more bonuses ahead as the firm grows in size and profitability.
Another way to get your business in the spotlight is by making a, “Net Operating Profit Bonus” plan. Depending on your cash flow, this can be paid out monthly, quarterly or even yearly. The bonus is simply a small percentage of your company’s net operating profit which is shared by all employees. This gives the employees a sense of loyalty and belonging to the firm. You will be amazed on how many employees stop wasting copy paper and start turning out the lights. In general, laying down an incentive compensation plans in your firm is a win-win for both the employees and the company.

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