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.
