Hr Pay for Performance: Team and Organization Wide Incentive Plan

Team and organization wide incentive plan

Empire State College

Course: Pay for Performance

Fall 2014

        One of the most important questions for a company is how do we develop an effective incentive plan?  In my opinion, a company needs to know what it wants to achieve and how it wants to get there.  The strategic plans need to be in place before incentives can be offered.  Your team also needs working knowledge regarding their positions, tasks, and the team to become effective in their job. However, companies cannot just wait for all of these to come together.  The steps must be developed simultaneously since the advancement of a company is an ongoing work in progress.

 According to Dessler (2013), “Because so many incentives fail, designing effective incentive programs is crucial.  Five important building blocks include determining whether using incentives makes sense, linking the incentive with your strategy, making sure the program is motivational, setting complete standards, and being scientific in terms of analyzing the effects of the incentive plan” (p. 414).  Without knowing the answers to these questions, a company cannot take the definitive steps toward an effective incentive plan.

Although developed in 1937 by Joseph Scanlon, the Scanlon plan is just as relevant and effective today as it was 70 years ago.  This is because basic human nature has not changed.  Listed below are the five basic features to a Scanlon plan as noted by Dessler (20013).

1.  Philosophy of cooperation:  Get rid of the “us” vs. “them” attitudes which can prohibit managers and employees from developing a sense of ownership in the company.
2. Identity: A company needs to articulate its mission or purpose in such a way that the employees can understand the workings of the business in terms of customers, prices, and costs. This will create employee focus.
3. Competence:  Careful employee selection and training right from the beginning because in order for this plan to work, it demands a high level of competence from all level of employees.
4. Involvement system: Employees can submit suggestion for improvement in the company. The suggestions are reviewed at the department-level committee and the ones that are considered to be valuable are sent to the executive-level committee. Then a decision is made whether to implement the suggestion.
5. Sharing of benefits formula: Should a suggestion save the company money, then a percentage of the amount saved goes to the workers and the balance to the company

(pp. 409-410).

Designing a team incentive takes planning, the understanding of the employees’ behaviors, and the direction of the company.  This type of incentive is based on the team’s performance. However, as I have seen from the experience as a leader, there will be those who want to do the minimum work, just skate by and still want to partake of the team bonuses. This is human nature and there will always be those who are just there for the paycheck and have no sense of ownership in the company.  When you have those who choose to just take the easy way, it can become demoralizing to the high achievers.  Those high achievers then slow down their work, the production declines, and this particular incentive proves to be lethal to a company such as Levi Straus, resulting in the closure of its manufacturing facilities.  You must also be careful not to incentivize the wrong behavior and performance. (Dessler, 2013, pp. 392,408).