incentive plans that drive performance...incentive plans that drive performance track: compensation...
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Incentive Plans that Drive PerformanceTrack: Compensation and Benefits
Presented by:
Bill Fotsch
Open-Book Coaching
801 Windgate Court
Villa Hills, KY 41017
859 331-6925
www.openbookcoaching.com
Number of employees in your company
1.Under 200 2. 200 to 500 3. Over 500
What is your industry
1. Manufacturing 2. Service 3. Distribution
Incentive plan(s) at your company?
1. None 2. Individual Plans 3. Team Plans 4. ESOP
What is of most interest to you? 1. How best to develop an incentive plan
2. How best to capitalize on an existing incentive plan
3. How to engage staff on your ESOP plan
4. Other ____________________________
Four Get Acquainted Questions:
#2
Define Winning
Performance
Metric
#3
Track, Forecast
& Broadcast
Performance
#4
Share
Incremental
Wealth Created
#1
Understand
The
Issues
Keys to Effective Incentive Plans
Incentive Plans build on the first 3 steps of Open-Book …
Let’s go over each of these steps with examples…
Keys to Effective Incentive Plans
1. Select the right group to incent
2. Develop with team involvement
3. Create win/win; Self-Funded
4. Define Bonus Details
5. Make sure it is understandable:– Ask for individual action plans
6. Learn / explore how to win
7. Track progress / forecasting
8. Refine annually / ongoing learning
Keys to Effective Incentive Plans1) Select the right group to incent
• If your company is under 500 employees, the group is likely your company
• Over 500 employees, break down into smaller natural teams: Kinkos: branches, Capital One and SWA departments. Think like a profit center.
• Focus where improvement is needed: BHP Billiton Iron Ore: Port Operations were the bottleneck
• If possible a group that is representative of other operation: CWT selected 3 travel centers that were similar to their entire operations
• Go with groups that propose incentive plans: ZCCM groups could propose cash generation plans
Keys to Effective Incentive Plans2) Develop with team involvement
Activity MONTH
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Employee Survey ---
Snr Mgnt Interviews ---
Customer Outreach ------
Financial Analysis ---
Orientation ---
Initial Performance Plan -----
Implementation -------------------------------------------------------------------------------
Performance Based Coaching -------------------------------------------------------------------------------
Education / Training -----------------------------------------------------------------------------------------------------
Results Review ----
Next Yrs Game Design -----------
Diagnostic Phase -->
Refine --> < --
<------------Implementation Phase -----------
---->Design Phase -->
Keys to Effective Incentive Plans3) Create win/win: Self-Funded
Keys to Effective Incentive Plans4) Define Bonus Details
Eligibility Recommendations• Employment Status: Full time employees and part time
employees that otherwise qualify are eligible. Temporary employees are not eligible.
• Time of Service: Employees, whether part time or full time must be employed for the entire quarter in which a bonus is paid.
• Disciplinary Issues: Employees who are on disciplinary review are ineligible for that period.
• Extended Absence: Employees with sick leave or extended excused absences in excess of three weeks in a quarter are paid a prorated amount based on the actual hours worked in the period.
• Payment Date: employee must be employed at the date of the payment distribution, which will typically be in the third week post the end of the period.
The incentive design document provides pros and cons…
Keys to Effective Incentive Plans4) Define Bonus Details
Payment Recommendations• Payment Distribution: All employees participate in the
team based incentive program, based on the level of compensation of the employee.
• Payment Frequency: Quarterly with weekly updated forecasts
• Payment timing: 2 weeks after final quarterly results are available, which typically means a month after the end of the quarter
• Game Duration: Annual, to be reviewed and refined each years as a part of the annual planning process, building on what has been learned.
Incentive Design and Eligibility & Payment Issues 4 page
document on your complementary flash drive has pros
and cons of various bonus designs.
Keys to Effective Incentive Plans5) Make sure it is understandable
Site Revenue•Customer Fees
•Supplier Fees
- Site Direct Costs•Wages and Benefits Costs
•Other Costs
______________________________
= Direct Profitability
Keys to Effective Incentive Plans5) Make sure it is understandable
- Ask for individual action plans
Keys to Effective Incentive Plans5) Make sure it is understandable
- Ask for individual action plans
Keys to Effective Incentive Plans6) Learn / explore how to win
And what would it mean if we accomplished half of this…
Keys to Effective Incentive Plans6) Learn / explore how to win
Answer: 2 weeks bonus becomes 3 months of bonus…
Keys to Effective Incentive Plans7) Track progress / forecasting
May 8 Forecast Updated Weekly:
Keys to Effective Incentive Plans7) Track progress / forecasting
May 8 Forecast Updated
Weekly:
Keys to Effective Incentive Plans7) Track progress / forecasting
• An ESOP can be an incentive plan
• For this to be the case, it has to become visible and something employees can affect
• Here is an example tied to the company scoreboard
$-
$5
$10
$15
$20
$25
$30
$35
$40
$45
Share Price
Actual Forecasted
Keys to Effective Incentive Plans7) Track progress / forecasting
• You can also fund the ESOP directly tied to company performance as this company does:
Keys to Effective Incentive Plans8) Refine annually / ongoing learning
Activity MONTH
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Employee Survey ---
Snr Mgnt Interviews ---
Customer Outreach ------
Financial Analysis ---
Orientation ---
Initial Performance Plan -----
Implementation -------------------------------------------------------------------------------
Performance Based Coaching -------------------------------------------------------------------------------
Education / Training -----------------------------------------------------------------------------------------------------
Results Review ----
Next Yrs Game Design -----------
Diagnostic Phase -->
Refine --> < --
<------------Implementation Phase -----------
---->Design Phase -->
Let’s go over each of these steps with examples…
What questions do you have?
Keys to Effective Incentive Plans
1. Select the right group to incent
2. Develop with team involvement
3. Create win/win; Self-Funded
4. Define Bonus Details
5. Make sure it is understandable:– Ask for individual action plans
6. Learn / explore how to win
7. Track progress / forecasting
8. Refine annually / ongoing learning
Thanks for attending. We hope it
was helpful. For more information,
please visit our website:
• www.openbookcoaching.com
Or contact me directly:
• Direct Line: (859) 331-6925
We help organizations improve their results and
the lives of their employees who drive those
results, by applying open book principles…
Keys to Effective Incentive Plans