When determining how top performers should be paid, businesses may want to craft their incentive compensation management to make sure they factor in return on investment. While companies could focus on determining pay by evaluating various metrics that measure company growth, they should make sure they have a sharp focus on incentive compensation management.
Businesses may want to pay employees based on their overall company performance, such as pay them based on the company’s total shareholder return or earnings-per-share growth, according to The New York Times. They could also choose to pay based on return on invested capital or return on equity.
James F. Reda, a compensation consultant at Arthur J. Gallagher & Company, said large companies need to be aware of pitfalls that can happen with compensation, according to the Times. Management may not succeed if they are not focused on the task at hand when it comes to evaluating compensation and return on investment. They may be concentrating on financial indicators that are out of their control rather than what they can influence directly.
To get the best return on investment, employers may want to evaluate and improve the effectiveness of their sales employees. They could compare the current performance of their staff with their future potential with the company.
Power of recognition in improving productivity
Companies should try to boost the productivity of their employees and achieve their true potential through incentive compensation. Employers could use pay raises, a new title or more benefits as a way to motivate workers and ensure they are performing at their optimal levels of productivity.
When first trying to establish a incentive compensation program, employers may want to perform an independent analysis of their internal and external work environment to pinpoint how they can approach sales incentives programs.
However, companies may want to avoid stretching themselves too thin when trying to fund these incentive compensation programs.
“The company recognizes the value of providing incentive programs to their sales team in order to drive new sales and increase marketshare,” according to the Incentive Research Foundation, in reference to a case study of a company cutting back on its incentive compensation programs. “However, budgets for these programs are being reduced as the company is forced to react to the new competitive forces in the marketplace.”
Offering benefits could increase performance
Companies do not need to spend a large amount of their funds on incentive compensation programs. They could simply try to improve productivity using the power of recognition, which can make workers feel valued. When workers know their work is recognized with praise by management, this act can increase their engagement with the job.
Employers that are thinking about expanding their incentive compensation programs may look into providing certain benefits.
When thinking about the best way to approach return on investment on worker productivity, companies may want to look at benefits that add the most value to workers and how they impact the firm’s bottom line, Forbes reported. Workers may want to have benefits related to health insurance or retirement plan services. By having companies contribute to these types of funds, staff are more focused on growing the company rather than their own personal and financial concerns.
“We saw that the winning companies framed their benefits programs in the context of what they want their companies to be,” said George Gendron, former editor in chief of Inc. “They have a vision for long-term success, and they believe that the long-term financial security of their employees is critical to that success, and has to be addressed on a number of different levels.”
