Group Incentive Plans
A Group Incentive Plan is a type of team-based Alternative Reward Program, but differs from the others in its features, advantages, and disadvantages.
Team Based Programs:
• Gainsharing
• Group Incentives
• Group Sharing
• Long-Term Capital Accumulation
In Group Incentive Plans, all employees in the company share in rewards based on performance gains tied to corporate profitability.
Design Features:
- Performance targets are established; requiring that standards be established and the planning process is well documented.
- Funding requires a systematic mechanism for setting aside sufficient monies to fund rewards.
- Includes a consistent and acceptable method for allocating rewards among eligible participants.
Advantages:
- Focuses the group on specific performance targets.
- Since rewards are controllable by individuals, the programs can be very motivational.
- The program can be integrated with other corporate initiatives (i.e., quality, product/service introduction, cost savings, etc.).
- Leads to improved communication and employee relations.
Disadvantages:
- Group Incentive Plans can be costly to install and administer.
- De-emphasizes individual performance which can result in excessive peer pressure.
- Requires open communication with employees on costs, profitability, etc. (although this can be a sensitive issue, there are alternatives available).
- If the performance targets are not carefully selected, adverse results may occur.
To find out more on how Compensation Resources, Inc. can help your company with Group Incentive Plans, please contact us or call us directly to speak with our compensation consultants at 877-934-0505 .
