How to Fix Your Incentive Pay

A majority of employees at advisory firms ó both professional and nonprofessional ó now receive a combination of base salary and incentive pay, industry studies find. But firms donít seem to be satisfied with their pay packages and, at my consulting firm, the most highly requested engagement is for designing (or, more commonly, redesigning) incentive compensation.

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Comments (2)
Sharing... on a sliding scale.

That's one of the best ideas I stumbled upon recently. Have everyone in the firm benefit, depending on how deep their role with a client is. From operations, sales, back-office, partners, owners, etc.

This can hopefully eliminate any competitive animosity amongst all the members of the team office.

Thanks for sharing this article.

Marty Morua
Posted by MARTY M | Thursday, May 22 2014 at 10:00AM ET
Great list for getting started, but it is the follow-through that matters once the plan is released into the wild. You have to check your design assumptions once the team starts performing.
- Are you getting the behavior you wanted?
- Are the reps "gaming" the plan somehow, looking for the loopholes or unintended consequences of the plan rules.
- Have you accidentally incented the WRONG behavior (cramming customers, not taking on new customers in favor of existing ones, etc.)

After that, make sure that the team trusts the system:
- How long is it taking you to pay your team? The longer it takes to pay, the less impact the incentive has.
- What is the error rate in commissions? Marketwatch puts the error rate in spreadsheets >88%.
- Does a given employee KNOW how much they are making, or is it an estimate?

Finally, make sure that credit is given where it is due, and that too much credit is NOT given. Over-sharing of credit for work turns a good incentive plan into a reward system. Incentives get people to come to the office early, Rewards keep them from quitting.

-Erik W. Charles, Principal Incentives Strategist, Xactly
Posted by Erik C | Thursday, May 22 2014 at 3:07PM ET
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