Incentives and The Rule of Three

Compensation Cafe

Designing an effective incentive plan is always a challenge. Over many years I have come to rely on what I call the Incentive Plan Rule of Three. No more than three metrics (KPI), no more than three defined goal levels, no more than three incentive plans for any one individual.

The Intent to Incent is Our Sun

Compensation Cafe

Incentive plans are one of the most complex aspects of pay and rewards. All of these simply orbit around the most important element of any effective incentive plan. A well-defined intent serves as the theme of every communication.

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What Incentives Can Do, What Incentives Cannot

Compensation Force

Incentive compensation. Powerful stuff when used well and - unfortunately - potentially even more powerful when misused and misdirected. Chip and Dan Heath said it well. Incentives are dangerous, and not just because people game them. Incentives are like that jet engine.

Incentive Plans Work Too Well (here’s the trick)

Compensation Cafe

It's not that incentive plans don't work well, it's that they can work too well in motivating unintended consequences. Are any incentive compensation experts shocked by this? The failed Wells Fargo incentive plan and Tax Reform are similar.

Behavior Bonus: Performance Enablement


While the Kazoo Employee Experience platform is primarily driven by spontaneous, timely employee recognition — some employees want specific incentives and directions for their behavior. This is where our Behavior Bonus functionality comes in. Using Incentives for Performance Enablement.

Why is Three the Magic Number for Incentive Plan Metrics?


The Rule of Threes states that there should be no more than three metrics involved with any incentive plan. But what makes the number three so powerful when it comes to incentive plan design? Finally, focusing on just one or two metrics could work well in theory.

3 Reasons Why Metrics Go Wrong

Compensation Cafe

Sadly, in some areas over the years, that’s become twisted to focus on the metric and not the behavior or goal underlying the metric. Jerry Muller, history professor and author of The Tyranny of Metrics, recently elaborated on this challenge in an article in Aeon.

Can Your Employees Make a Difference? What Does Your Incentive Plan Say?

Compensation Force

I am floored by how many times, during the design of an employee incentive plan, management will trot out the assumption/foregone conclusion that individual employees are unable to make a meaningful contribution to overall organization - or business unit - performance measures.

Employee Incentives: Good or Bad?


One such benefit that has been shown to really catch the interest of employees is that of incentive programs. To start with the basics, employee incentive programs are any program designed to provide your employees with recognition and appreciation.

Long-Term Incentives for a Short Term Generation

Compensation Cafe

Second, this means that the majority of these workers do not intend to benefit from the entirety of their Long-Term Incentives (LTI). Designing LTI to attract, motivate and retain the “next” generation: Opportunity 1: Consider “Mid-Term Incentives” that link to Long-Term Incentives.

Woulda, Coulda, Shoulda: An Incentive Compensation Story

Compensation Cafe

Not the least of them was the creation, design and management of the company’s long-term incentive program. She planned her year well and executed with the precision of a heart surgeon. She also combined all of these skills to build and manage her incentive compensation plans.

Money for Motivation: How Incentive Based Pay Works


We want to instantly think that we can drive performance or discourage behaviors through monetary incentives. Here are a few: Bonuses. Group incentives. This is identical to the fixed/variable cost discussion as it pertains to economics as well.

Cafe Classic: Reviewing Your Incentive Plan: A Three-Tiered Conversation

Compensation Cafe

Editor's Note: Reviewing existing incentive plans is part of the job for many of us. One of the temptations we encounter is to try to benchmark our way into the right plan structure and metrics - looking externally at so called "best practices" in order to figure out our next design move.

Employee bonus programs: What’s right for your company?


If you think your business is too small for an employee bonus program, consider these two questions: Have you noticed less productivity or a decline in employee morale? A meaty bonus program could do the trick. But, before you hit the ground running, take a moment to dive into what kinds of bonuses are out there, as well as what goes into creating a bonus program. Employee bonus program basics. First things first: How are employee bonuses defined?

Using Incentive Compensation Software to Drive Performance


Incentive compensation is the process of paying employees based on the performance of an entity. For this reason, many organizations have increasingly turned to incentive compensation software. Incentive Compensation Examples. Incentive Compensation Best Practices.

Cafe Classic: Is it Safe to Incent Safety?

Compensation Cafe

Editor's Note: Continuing our end-of-summer Classic week here at the Café with the question "are incentives equally applicable to -- and appropriate for -- all areas of human endeavor?" . I recently came across an interesting article in Incentive Magazine about safety incentives.

The Elements of a Strong Incentive Plan


Designing, managing, and communicating incentive plans are some of the most challenging hurdles HR and compensation teams face today. Likewise, good incentive plans are well-balanced, can be easily understood by employees, and are difficult to game.

5 Employee Incentive Ideas that Boost Employee Motivation


Finding employee incentive ideas that boost talent recruitment, retention, and development is like finding a golden ticket for business success. Yet most traditional employee incentive plans don’t work for longer-term employee retention or talent development. Motivation-Boosting Employee Incentive Ideas. Tie Incentives to Spontaneous, Real-time, Specific Recognition. How many employee incentive ideas offer that?

A Fresh Look at the Metrics in Your Management Incentive Plans


Professionals in the human capital space are often confronted with questions about business performance metrics, especially when it comes to plan design for short-term and long-term incentives. More concerning is the likelihood that most managers don’t have a clue how to personally impact those results—bringing into question the whole notion of incentive. Boards of directors that reluctantly approve bonus payouts, when they know darn well the goals were sand-bagged.

5 Pay Predictions Post-COVID

Compensation Cafe

If normal worked so well pay would not be a constant thorn in the side of companies and their employees. There will be a rethinking of the concept of “long-term” incentive plans. Incentive plans will respect this value in both design and potential value.

Are You Paying for Peripheral Vision?

Compensation Cafe

We seem to love to get granular with incentive plans. So many compensation professionals are tasked with not missing anything, they include darn near everything in their incentive plans. It is not a great evolutionary trait in incentive plans. The next metric may be 25-30%.

What Would Einstein Do (If He Had to Solve YOUR Pay Problems)?

Compensation Force

Well, help comes our way from an unexpected source: renowned physicist and Nobel Laureate Albert Einstein on solving tough problems under pressure. Base Salary Management Bonus/Incentives Compensation - General Metrics/Analytics Pay for Performance

Develop Grow Achieve - 3 Tiers for P4P

Compensation Cafe

Metrics for development can be tricky when looking for direct alignment to pay. These are the kind of goals that work well for regular coaching sessions and a loose link to pay. In individual terms we should focus on those metrics that drive growth, rather than the end result of growth.

Is Team Chemistry the Next Big Thing in Performance and Rewards?

Compensation Force

More quantitative attention is being paid to how well players improve the in-game performances of their teammates. As Keith will point out, it is the best metric for how an individual player really contributes to the success of the overall team.

Compensation Dentistry (part 1)

Compensation Cafe

Annual and long-term incentive plans are often not as well cared for. Just like the fact that most kids don’t grow up wishing to be a dentist, few compensation professionals aspire to be mavens of incentive plans. Yes, incentive plans can be harder than base pay.

Cafe Classic: Are Your Compensation Plans on Autopilot?

Compensation Cafe

Might as well JUMP! Like the poor amphibian in the well-known boiling frog story, where the little green felllow is placed in cold water that is slowly heated up until he's cooked before even realizing he is in danger, it is hard to know when to jump.

Are You Using Pay as a People Manager?

Compensation Force

Try taking away an incentive plan, however ineffective or dysfunctional, from a manager who is convinced it is the cornerstone of motivating his or her staff. Can pay - and specifically incentives - ever function as a true proxy for management? Bonus/Incentives Pay for Performance

Cafe Classic: The Top 4 Risks in Pay for Performance

Compensation Cafe

Incorrect Metrics. Metrics are the “things” that are being measured. Goals are the levels that define the success of each metric. A colleague of mine often says that the problem isn’t that P4P programs don’t work well, it’s that they work TOO well.

Your Employee Referral Program Guide: The Benefits, How-tos, Incentives & Tools


Your Employee Referral Program Guide: The Benefits, How-tos, Incentives & Tools. Here’s everything you need to know about employee referral programs, including benefits, how-tos, incentives, and tools. Collect metrics on any online communications so you can try to gauge interest.

Cafe Classic: Before You Link Pay to ANYTHING.

Compensation Cafe

As any of us who've considered using customer feedback metrics in incentive design know, this can be a potential minefield. Markey's cautionary advice on pay linkage is well written and worth our consideration beyond the boundaries of customer feedback metrics.

When you make a promise (aka contract) keep the promise!

OmegaHR Solutions

Contracts for bonuses or commissions need to be worded carefully. In the interview process, he told us a story of why he was no longer with the very well-known company with whom he had been employed. Store profitability was a significant factor in determining the amount of the bonus.

Cafe Classic: Pay as a People Manager

Compensation Cafe

I will never forget one executive I worked with in designing (what was meant to be) a broad-based incentive plan. Try taking away an incentive plan, however ineffective or dysfunctional, from a manager who is convinced it is the cornerstone of motivating his or her staff.

The End of Compensation, Rewards, and Human Resource Management

Compensation Cafe

We ask our consultants and researchers to supply the latest artillery to help our troops stay well-ARMED (‘E’ for Engagement; ‘D’ for Development). We define, measure, and report how well we’re doing by proffering numbers, fancy graphics, and storylines about the state of our ARMS.

The Best Performance Goals Are D.U.M.B.

Compensation Cafe

Goals are: D – Demonstrable : The metrics and goals you use for P4P must show their impact. B - Business Critical: There are a whole lot of things that managers want their employees to do well. It really is important that each of these things get done and done well.

Because only 10% of your team really matters, right?

What is Paul Thinking

Say you have 100 sales people (or employees with a quantifiable metric) and you want to do something to drive increased performance. Most of the time you, or your VP of Sales will suggest an “incentive” program to get people focused on sales and reward those who sell more.