Pay Incentives Can Improve Quality Performance
Pay incentives that are awarded strictly for a company’s increase in short-term profits can send the wrong message to employees and can undermine the company’s overall strategy for success, according to Quality Matters, the e-newsletter of the National Housing Quality Program.
Instead, bonuses and incentives should reward customer satisfaction and performance excellence, the publication from the NAHB Research Center says.
“Pay systems can be an effective method to reward performance excellence and reinforce an alignment towards company goals,” the newsletter says. “It is a key link between a company’s strategic direction and the people that make it happen. Performance incentives not only ensure that high-performance workplace practices become part of your company’s coordinated organizational development, but can also produce quality results that are complimentary to the overall goals of the company.”
A successful approach to providing those incentives “may include putting profit incentives into a bonus pool, then awarding performance bonuses contingent on fulfillment of the company mission and other key factors for business success, such as customer satisfaction. With this approach, the importance of the company’s mission, value and vision statements take on new meaning. Tune up these statements to remove elements not important enough to reward with compensation so that your pay system ‘walks the talk’ of your leadership system.”
More than written declarations and mission statements, the newsletter notes, employees look at what affects their pay to see what management feels is most important for business success.
“Properly designed pay incentives can reinforce a clear and consistent message that can align everyone in your organization to work together toward a common vision and goal,” the Research Center says. “Examine your company’s incentive system to see where it is leading you.”