Common Incentive Plan Challenges & Effective Ways to Address Them

Common Incentive Plan Challenges & Effective Ways to Address Them

When preparing for and designing incentive plans, organizations tend to run into three main challenges. For one, there are some “big” objectives you want or need people to accomplish. These may include large-scale endeavors, such as increasing revenue or safety, or becoming more sustainable.

Then, there are also smaller things that simply cannot be ignored. For this reason, having many people on a committee to help design an incentive plan can leave you with dozens of metrics to consider.

Lastly, there is also the math behind the modeling and payout expectations. While your organization has objectives which must be measured and tracked, you may struggle to identify ways to measure them, or lack the means for measuring them effectively.

Implementing “The Rule of Threes” can help you simplify and overcome these challenges. Best of all, you probably don’t even have to start with an entirely new plan. This principled approach to incentive planning states that:

  • Each plan should have no more than three metrics
  • There should be no more than three defined goal levels for any plan
  • No employee should have more than three incentive plans which apply to them


Reuse, Reduce, and Recycle

Many compensation teams scrap their entire incentive plan and completely start over every few years. Yet, you don’t always need to start with a new plan. In fact, for the most part, the incentive plan you currently have is probably fine in many ways. Thus, before you decide to start all over, consider taking this approach:

  • Reuse the plan you already have
  • Reduce the plan to a level that makes sense for your current needs
  • Recycle this approach to improve on an annual basis

By recycling your existing plan and applying the Rule of Threes, you can simplify incentive planning complexities while still developing an approach that suits your organization and its current needs.

HRsoft is the trusted global leader in compensation management software whose COMPview solution is proven to control and simplify the full process and allocation of merit, bonus and equity awards to drive manager and employee engagement.

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