In a recently published survey, the Conference Board of Canada found that four in five Canadian organizations offer their employees performance incentives – including variable pay, annual incentives, performance bonuses etc – to motivate them to achieve performance goals. But most of the organizations offering these types of plans don’t measure the actual effect that these have on the organization’s results.
“With so many organizations rewarding employees with incentive pay, organizations need to do a better job of finding a link between pay plans and business results, to ensure they are getting value out of their incentive programs,” said Karla Thorpe, Associate Director, Compensation and Industrial Relations.
In 2011, organizations plan to spend an average of 11.6 per cent of total base pay on short term incentives- a slight increase from 2010 (11.5 per cent).
More than 80% of those surveyed had incentive programs for at least some or all of their employees. But 69% were not able to measure the cost effectiveness of their incentive plans against the level of performance achieved by the individual, team or organization.
Most organizations believe these plans are somewhat effective in improving results but found it difficult to measure the correlation. The Compensation Planning Outlook 2011 survey found that 54% of organizations believe that their incentive plans are effective or very effective. 42% were ambivalent about their plans effectiveness and 4% felt their plans were ineffective or very ineffective.
97% of all organizations surveyed found that corporate results are the most effective way to measure their plans effectiveness.