Performance measurement and incentives

In order for a company to create an efficient Performance measurement and incentives plan, it has to align multiple interdependent elements with the goals of the business.  The idea is to ensure that it communicates a clear standard when it comes to the behavior of its employees.


The plan needs to have a purpose, in addition, it has to project a potential that you need to take into account.


You will need to use multiple indicators as they will allow you to determine performance and to make sure that you arrive at the right incentives. The indicator role is to seek to improve performance and behavior, while creating focus via reinforcement and communication. Most of the time indicators are designed to impact performance and behavior, but these are not motivators and that means that you will have to find the right incentives for your employees.


We found that there are two core approaches in this regard, which focus on targeting KPIs and offering a profit based allocation. When you establish the appropriate metrics and measures for an incentive plan, you need to understand the core principles. These include:

  • the overall improvements that an incentive plan can deliver
  • can the plan become self-financing
  • can the plan motivate employees
  • can the plan help you produce more profits for your business.


Profit allocation

Allocating profit as an incentive can be a wise move, because rewards will be strictly driven by performance. It will help shape the company’s overall performance, but the issue here is that the departments or individuals may not be showcased and that can be troublesome. This is why you need a separate management system that will reinforce the necessary behaviors which are needed to achieve superior profits.


Targeted KPIs

In this situation you will have to focus on a specific set of KPIs for individuals, departments and company matrixes. The idea here is that individuals focusing on these incentives will help the entire business as a whole to achieve its overall goals.

In the end, measuring performance in the company is all about finding the right indicators. Once that is done, it’s crucial to make sure that you find the best incentives, either company-wide or for each individual. It can be a demanding process, but at the same time you can get plenty of rewards, for both the individual and the company.


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