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The one essential factor your performance incentive scheme must contain

by , 07 June 2016
The one essential factor your performance incentive scheme must containA performance incentive scheme can be an asset to your company because it can help increase overall motivation and performance in the workplace.

But the way in which you lay out your performance incentive scheme is just as important as its purpose. And if you get anything wrong in it, especially the factor I am going to discuss in this article, your entire scheme will fall apart, along with increased performance in the workplace.

So to help you get the most out of your performance incentive scheme, here's the one essential factor you need to include in it...


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The one essential factor your performance incentive scheme must contain is…

Clarity is arguably the most important factor a performance incentive scheme can contain because it will provide structure and consistency to it.

To ensure it, you should make sure the following five points are present in it…

Your performance incentive scheme should be clear with achievable and quantifiable objectives – which have been agreed upon.

Objectives can include, for example:

·         Increasing the turnover by 8%;
·         Reducing absenteeism by 13%;
·         Increasing the amount of academic qualifications by 18%; and
·         Reducing customer complaints by 20%.
POINT#2: There should be clearly laid-out rules for the scheme.

For example:

·         Incentives will only be paid out for performance criteria which the employee directly contributes towards; and

·         Incentives won't be paid with other guaranteed bonuses or at the same time as annual increases.

Keep reading to see what the other three points are…

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It should specifically state who'll receive it. For example, individuals, groups, departments or whole teams within your company.


It should clearly lay out how the amounts for incentives will be determined.

For example:

·         Percentage of profit; or
·         Percentage of sales; etc.

Clear guidelines should be set for the measurement of the specific targets set out.

For example, you can use the performance appraisal results of an employee to determine whether or not he can get an incentive bonus.
REMEMBER: By including these five points in your performance incentive scheme, you'll ensure clarity, which is by far the most important factor within any incentive scheme.

*To learn more, page over to Chapter I 01: Performance and Incentive Reward, in your Practical Guide to Human Resources Management handbook, or click here to order your copy today.

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