11 Reasons That Bonus Schemes Fail
Do you make use of a bonus scheme in your business?
Have you become concerned that it is not really delivering the performance gains that you had hoped it would?
Or perhaps you are considering bringing in a bonus scheme and want to know the most effective way to design and implement it?
If you answered yes to these questions, you may be interested in this infographic from Towers Watson, the global rewards and compensation analysts, titled, ‘Why Annual Incentives Often Fall Short’.
Some of the key findings from the Towers Watson Talent Management and Rewards survey were that:
1. 90% of organization are operating a bonus scheme but may not be getting adequate returns
2. Less than 50% of employees agree that high performers are rewarded sufficiently;
3.18% of firms give employees the same payout relative to target regardless of individual performance, meaning that there is not enough differentiation between good and bad performers in many organizations, dampening the effects of the bonus scheme.
Why Bonus Schemes Fail and How to Fix Them
To maximize effectiveness of annual incentives and motivate top performers, reduce payouts to average and below average performers and reallocate them to top performers so they receive their full target payout.
If you would like to download my Bonus Scheme for small business, please click here.
8 More Reasons Why Bonus Schemes Fail
Iconixx produced this infographic outlining 8 key reasons that incentive plans fail in business. I have summarized those reasons below.
1.Lack of communication means that bonus plans are confusing and therefore not able to motivate staff effectively.
2.Short-term focused means that the bonus schemes incentivizes short term goals at the expense of strategic activity and long term planning.
3.Not encouraging the right behaviours means that the scheme rewards behaviours which don’t actually make a significant difference to the business.
4.Not aligned with the broader strategy and overall business goals.
5.Poor performance evaluation process. Unless you have a trusted and formal evaluation process, the process can be subjective and favouritism may creep in.
6.Revenue is the only measure. With too much focus on number, other factors which are also critical to success like quality and customer service can suffer.
7.Too individualized. If they plan doesn’t have a team component, team work, a key driver of success too, will sufffer.
8.Make employees too competitive with other. Plans which pitch teams or individuals against each other can be too competitive and ultimately counter-productive as they create too much tension.
If you would like to download my Bonus Scheme for small business, please click here.
