Archive for the ‘R’ Category

Performance Measurement and Incentives

January 23, 2008

Sales performance incentives are relatively straightforward to figure out. At the simplest level, sales incentives are calculated by determining sales targets, measuring sales performance, and rewarding employee for their performance against the objectives.

However, performance-based incentives are harder to figure out in areas not involving sales. The key ingredient for incentives to work is to define MEASURABLE objectives.

There are other areas beside sales, where it is also possible to define quantifiable metrics. For example, for an employee working on an assembly line , we could measure the number of units manufactured in a certain period of time and the defect rate. We could measure the number of items shipped on time for a postal worker. We could also measure the response time and the number of complaints per call for a customer service associate.

The Harvard Business School created some of the best performance measurement articles and videos [UPDATED Apr 22, 08] I have found on the Internet. They focus more on enterprise performance measurement versus individual performance indicator, but some of the topics could offer good ideas for measurable goals.

Before implementing an incentive program, it is important to understand how affected employees feel about the planned metrics. In some cases, bad metrics could result in effects opposite to what was intended and lower moral!

In my next posts I will discuss some of my personal experiences with incentive compensation.