An incentive plan recognizes that individuals impact the operation's productivity and profitability.
Employers constantly search for ways to attract and keep good employees. One tool that can help you accomplish that is an incentive program.
But, too often producers confuse incentive plans with profit-sharing plans. Both programs reward employees, but they are quite different. Profit-sharing shares business profits with all employees. An incentive plan rewards employees for their individual performance.
A well-developed incentive plan recognizes that individuals can make a real difference in the operation's productivity and profitability. During his 25-year career, Darrell Dunteman, a business management consultant in Bushnell, Ill., has seen a lot of incentive plans. Here Dunteman provides six areas that you must address in order to develop an effective employee incentive plan.
1. Design it around individual employees.
Review the baseline performance requirements for each job and establish goals that employees can reach. Tie the goals to measurable improvements in the operation's profitability. Then, determine how much it will add to your bottom line.
Plan to share a portion of that increase with the employee. How much should you share? Some experts say you should split the additional profit with the employee.
2. Design a program that the employee can control. Incentives must be tied to something that employees can control or influence. An example might be to tie it to conception rates or reduced nursery mortality.
3. Set realistic goals for incentive levels.
Once you've done this, you have to stick to them. Changing the incentive program after you implement it will create distrust between the employer and the employee. The employee may view program changes as an attempt to take money out of his/her pocket. After all, you established the original rules.
4. Keep it simple. Each employee should be able to look at his/her pay stub and clearly determine what portion represents the incentive payment without having to make complicated calculations.
Resist the urge to tie the incentive program to the business' net income. Otherwise, the employee may think that you will manipulate the program's outcome by making additional purchases at the end of the year.
5. Pay incentives often to keep employees
interested. Immediate feedback generates a more direct response. For example, if you wait until the end of the year to pay out an incentive it dilutes the reward impact.
The more directly an employee is rewarded, the more support he/she feels, thus it increases your chance of actually inspiring better performance. Quarterly payments work well.
6. Keep the incentive separate from salary. Never use the incentive program as an opportunity to reduce an employee's salary or to eliminate a raise. Pay the employee a fair salary, and then reward the employee financially for the gains that he/she makes to the operation's bottom line.
With some jobs, such as a mechanic or tractor operator, it's difficult to measure performance and therefore to establish performance-based incentives. Still, they play a vital role in keeping the business running smoothly and they shouldn't be left out.
For these workers, establish measurable goals and attach a specific dollar amount to each. For example, you have a mechanic who doesn't put his tools away, resulting in lost time for others who use those tools.
Offer a $200 bonus each quarter for the tools being in their proper place. You'll need to conduct an inspection – weekly or monthly. You could reward an employee a $200 bonus if the artificial insemination lab is cleaned properly. Take the same approach to power washing.
You've spent the time to hire and train your employees, providing an incentive plan can be an effective tool to keep them motivated.