A recent study verified that incentive compensation plans are effective in motivating employees toward better performance, although it was also showed that construction companies struggled with incentive compensation management strategies. The Incentive Compensation Effectiveness Study conducted by FMI consulting group revealed that discretionary incentives, which most construction companies offer, are ineffective at driving performance.
It was also found that 37 percent of executives at construction firms utilized industry market data and other data sets to improve incentive plans. Although just over a third used data well and understood the importance of industry trends on ICM programs, the remaining companies tended to struggle with compensation plans.
Research also discovered that most construction firms do not appropriately use incentive compensation initiatives to reach key company objectives in the long and short term.
The report showed that companies can improve ICM plans by initiating strategic planning at the beginning of the process in order to create a strong structure that will increase performance across the board. FMI also stressed the importance of performance management after the plan has been implemented, as well as open lines of communication between supervisors and employees.
Companies that are looking to implement or improve a performance-based plan can use incentive compensation software, which will help executives sort out the process and create an effective and efficient plan.