3 Tips for Effective Incentive Compensation Management

incentive compensation management

3 Tips for Effective Incentive Compensation Management

The idea that money is a great motivator is timeless. Yet, while offering a higher salary may attract top talent, it won’t necessarily promote long-term performance conducive to meeting your organizational goals. That’s why so many business leaders opt for incentive compensation.

Employers utilize incentive compensation plans to reward employees for performance that goes above and beyond. It sounds fool-proof, but there are some ways in which incentive compensation management can go wrong. By following these tips, you’ll be able to master incentive compensation management in your company.

  1. Establish A Vision: What are your long- and short-term goals for the company? Establishing these goals prior to writing incentive compensation plan will make implementing and managing it much easier. According to HR.com, this will require some level of self-evaluation up front. Yet, it will save you tremendous effort down the road that might otherwise be spent trying to fix an ineffective incentive plan.
  2. Recognize Continuous Excellence: Borrow this effective incentive compensation management strategy from Continental Airlines: don’t just reward employees for out-of-the-ordinary performance, reward for consistently excellent performance. The airline offered a $65 bonus each month to crew members who helped achieve on-time departures as a way to help improve its overall on-time record (source: SHRM). If there’s a metric you’d like to see improve in your company, consider offering a reasonable bonus to incentivize progress.
  3. Strike A Balance: As Forbes puts it, employees work for money, “and most of us enjoy spending it.” Yet, studies may suggest that money alone isn’t always motivation enough to encourage high performance. As such, there are other ways – outside of money alone – in which you can consider rewarding employees. You can also think about how each employee responds to recognition: does he or she like to be publicly rewarded for hard work, or is it preferable to be recognized privately by a manager? Can you consider other options, such as stocks or additional benefits? Exploring these possibilities could help you create and manage an incentive plan that’s not only attractive to employees, but also equitable for your organization.

Incentive compensation management doesn’t have to be difficult. With solutions such as COMPview from HRsoft, managers can make wise award decisions based on valuable data, and they can do so in a timely manner so that the employees can see the relationship between their hard work and your appreciation working in real-time.


HRsoft is a leading provider of strategic talent management software that improves manager effectiveness and business results. Our full suite of cloud-based HR software solutions includes applicant tracking software, compensation planning software, total rewards software, stay interview software, performance management software, and content management software. To learn more about our Compensation Management Software, COMPview, click the button below!

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