Incentive PlansIncentive Plans that Work

What makes an incentive plan a good fit for a given company? How about for your company?

Rewards programs are a mainstay of corporate America; 91% of companies surveyed by Aon Hewitt had at least one. But many of these plans are falling short. There are plenty of cautionary tales of plans that don’t work for C-level executives. Plans for the rank-and-file can fail to produce desired results too, by failing to encourage employee engagement or by focusing on metrics that don’t contribute directly to your organization’s goals.    

When set up properly, the right plan will motivate your team to reach specific metrics—and help your company reach those goals. Whether you call it an incentive plan, a motivational program, or use the human resources term “variable compensation,” your plan should be structured around your organization’s needs. Let’s take a look at how to make that happen.

How to Structure Incentive Plans that Work:

Set Goals and Link Them to Metrics

This probably sounds like the easy part. However, your incentive plan requires goals that can be tied to your team’s individual contributions and accomplishments—and those contributions need to help your company increase its overall performance and sales. So although you can set and achieve a goal of “raise morale” with most any incentive plan, you’ll want to yours to link rewards directly to quantifiable and challenging yet reachable goals. That way your team will know exactly what it’ll take to take home those rewards.

Use the data and metrics that can help move your sales or performance needle. As an example, for contact centers, that usually includes:

  • First-contact resolution
  • Service level
  • Sales volume
  • Conversion rate

You may have multiple paths to rewards, with different teams having their own set of metrics required to achieve the same reward. If so, make sure the work needed to hit the mark is equitable for both teams.

Most incentive plans focus first on the metrics that will produce the best results in the shortest amount of time. You can also create incentives tied to a range of metrics and different timelines. That way teams can work toward achieving the organization’s short-term, mid-term, and long-term strategic goals.

Use Tiered Incentives

Using different incentive levels is a great way to ensure your whole team is included and motivated to help reach your company’s goals. Offering a luxury car to your top salesperson can help get your sales team fired up to close deals, but you’ll want everyone to contribute. Including a range of rewards in your incentive plan can help make that happen, and can give you more options for getting everyone engaged and involved.

This Harvard Business Review article on how to motivate salespeople covers how different incentive plan structures, including tiered incentives, work with different groups of employees. They break the usual workforce down into three categories:  

  • Stars – who work best with unlimited commissions, overachievement awards, and by having multiple winners.
  • Core Performers – the largest group, especially well motivated by multi-tier programs.
  • Laggards – respond well to bonuses and social pressures—both from the natural urge to improve, and from the group’s overall desire to earn rewards.

Rather than the winner-take-all luxury car scenario, finding ways to meet your employees where they are will get the whole team moving.


One of the biggest motivational terms these days is gamification. You’ll see it everywhere from trade shows (booth visitors learn about your product while playing games!) to full-blown incentive programs. It’s understandable; the idea is essentially to turn work into play. Fast Company boiled down the best ways to gamify work into two main points:

1) Player-first design: Create games that are unique and have meaning. Games that employees don’t want to play are counter-productive

2) Keep employees focused on prizes: Game-based incentive plans aren’t a set-and-forget proposition. Ensure all participants have a clear, ongoing understanding of the requirements to achieve rewards with a hands-on approach from your management.

The article’s authors also noted that companies with recognition programs that “genuinely reflect their values” boost their productivity by nearly one-third.

Analyze and Update

Generic turnkey rewards programs can spur short-term results, but the best incentive plans need ongoing management. You’ll want a series of milestones tied to your company’s fiscal calendar and strategic roadmap. And you’ll want to assess the program’s performance periodically to ensure it’s promoting the behaviors and actions you want. Are those metrics increasing? Which rewards are getting the best results? The idea is to get better results over time, in a measurable way from a well-considered and strategically sound plan. “Set It and Forget It” won’t cut it. A static plan is convenient but also stagnant.

A properly-designed plan will give you the data needed for an accurate analysis, and allow modifications so that you can improve results as needed. In short, the plan should grow along with your company and where it’s headed.

Use Professionals

Variable compensation has been increasingly popular over time. A 2017 PayScale study found that nearly three-quarters of responding firms offering some type of variable compensation. It makes sense; salary raises are (usually) permanent, while variable compensation may ebb and flow depending on individual performance and company results.

However, if an incentive plan is part of your employees’ variable compensation, it needs to be designed and managed with your team in mind at every step; if management looks at it as just a way to save on compensation, that plan faces long odds on success.

If your organization’s management or HR team is experienced at incentive plan design and is already getting great results, you’re set. If you lack that kind of expertise or aren’t getting the results you want, you should get professionals to handle it for you.

Getting Started

Inproma tailors each incentive plan to help achieve your organization’s specific strategic goals. Our employee recognition and rewards programs are proven to increase your team’s engagement and can help keep your best people happy. The bottom line: Better results than financial compensation alone. If you need a plan for your firm, or your current plan isn’t getting the job done, let’s talk.