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Iconixx Insights BlogIncentive Compensation Management

5 Steps to creating an effective incentive compensation plan

By September 5, 2013June 11th, 2024No Comments

Kicking off an incentive compensation plan can be tricky, especially for beginners. There are many things to consider when developing an incentive compensation management plan, including pay scales, commissions, bonuses and other types of rewards for individuals and departments. With so many factors to take into account, it’s not surprising that some companies struggle to find the right balance between a reward system and other company best practices. Here are the first few steps toward building an effective ICM plan executives can take: 1. Lay out goals Establishing goals and achievement guidelines is the first step in setting up an ideal compensation plan. An executive can begin by finding areas for improvement in a company. A business may need to increase sales numbers, improve customer service or speed up service delivery times. By establishing these goals for improvement, an executive can decide on the best fitting goals for individuals or departments.These benchmarks will be what employees work toward to earn their incentives, and setting these goals is the perfect way to align company objectives with individual behavior. 2. Establish compensation guidelines Once supervisors or HR team members have decided on what they want to achieve with their ICM plan, they can begin drafting ideas for compensation. An executive should consider base pay, commission rates, the possibility of bonuses, merit increases and other possible ways to compensate and motivate staff. If a supervisor is having trouble deciding on the best route for compensation, incentive compensation software is a great choice to make. ICM software helps companies decide on and track payments, offering innovative ideas for compensation. 3. Communicate with staff After a company has decided on a course of action, it’s important to communicate these and other potential changes with staff. Even the best plans, which will benefit individuals and companies alike, may be met with some resistance, making communication essential. Executives should hold meetings with staff members to go over the intricate details of a new compensation plan – when people are informed, they will be less likely to jump to conclusions or become irrationally upset about possible changes to their paycheck. 4. Track progress After a supervisor enacts a compensation program, it is essential to track the plan’s progress. This is just as important as the initial implementation, as it is impossible to know if a plan is working without proper tracking. Incentive compensation software gives executives the power to monitor employee performance and overall company progress. A supervisor can log on to their account and will be instantly greeted with a wide range of information – individual sales performances, company-wide achievements and even industry trends. This invaluable data will not only be at a supervisor’s fingertips, but salespeople and other employees will also be able to access their sales information to gain a better understanding of their performance. Individuals can see how they are faring with their sales goals, how many sales they need to make to reap their rewards and how to best budget their time. By facilitating self-tracking and executive-tracking through ICM software, a company can be sure they are bringing in the best performances possible. 5. Adjust the plan Even the best programs need a little adjustments once in a while. After weeks or months with the same plan, supervisors may notice gaps in sales, which can be fixed with new plan components and other changes. For example, if a supervisor notices sales are lagging in a particular department, they can institute more frequent sales competitions or offer higher rewards to increase motivation across a company.

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Ballast Point Ventures

Ballast Point Ventures is a later-stage venture capital fund established to provide expansion capital for rapidly growing, privately owned companies in diverse industries, with a particular emphasis on companies located in Florida, the Southeast, and Texas. The BPV partners have more than 70 years of combined experience investing in and building high-growth companies in a number of industries, including healthcare, business services, communications, technology, financial services, and consumer goods. BPV has $200 million under management and seeks to make equity investments ranging from $3 million to $10 million.

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Harbert Management Corporation

Harbert Management Corporation seeks to generate superior returns for their investors by identifying and investing in the most promising early growth stage companies in the Southeastern U.S. HMC seeks to capitalize on what it believes are compelling regional dynamics, such as a strong and fast-growing economy, significant research and development activities, and an established entrepreneurial community. The HMC team combines substantial investment, advisory, and operating experience with capital and networking contacts to support great entrepreneurial teams in successfully executing their growth plans. With offices in Birmingham, Alabama; Richmond, Virginia; and Gainesville, Florida, it’s well positioned to partner with entrepreneurs throughout the Southeast.

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KBH Ventures

KBH Ventures was an early investor in Iconixx Software. KBH's investment philosophy plays a significant role in the firm's successful track record. KBH believes in running businesses to be cashflow positive and profitable every month. Startups and companies in a startup mode, such as one that has been purchased in distress, are expected to generate revenue within the first six months and reach profitability within the first 12 to 18 months. KBH also only invests in or acquires companies that are in the startup phase or have less than $20 million in revenues. KBH targets technology companies that offer business-to-business services.

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S3 Ventures is an early expansion and growth stage venture firm with $200 million under management. It’s focused on information technology solutions that solve large business problems. S3 also invests in medical devices that improve the human condition. S3 invests in category-defining opportunities. It partners with the team and help focus methodically on what it takes to build a successful company. S3 today helps talented entrepreneurs take their technology and market knowledge and form valuable businesses in a repeatable fashion. Investment sizes start at several million or more for Series A, B, and C financing.