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Tips for building an incentive compensation plan?
Our company is restructuring our compensation and benefits plan for all incoming employees. I am torn between providing long-term and short-term incentives. Short-term would help with motivating my employees, but long-term would help with achieving "big picture" goals. What do you think? Would you implement long or short-term incentives? Or both?
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2 Answers
It all depends on whether short or long term goals have the priority for the business I would imagine. I would try to aim for both but possibly on a rolling basis. In this way a short term performance uplift is rewarded but also contributes on an accumulative basis to a longer term goal and thus, a longer term reward.
To maintain focus on big picture goals I have always found it is worth building in clear quality checks. This will help to ensure that short cuts cannot be taken which might achieve the reward but at the expense of the company's ethos or reputation.
If your company is a startup, definitely long-term (and generous). If it is an established company, focus more on short-term because employee's impact in the overall company in the big scheme of things, is small.
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