Last month we took a look at Profit-Based Allocation as a basic approach for company executives to consider when developing incentive plan indicators; this month we’ll explore Targeted Key Performance Indicators (KPIs) and how they can lead to improvement in profits.KPIs generically constitute incentive plans that are within the reach or control of employees, the theory being that the easier it is for employees to reach their goals, improvements in company profits will be the outcome. The KPI approach can involve company, department or individual metrics, but in order to achieve the best results the right metric must be selected. Company metrics could be a combination of revenue growth and net income and might include return in equity, return in assets, gross sales, net income, revenue per employee and profit per employee. Departmental indicators could include gross sales and margins, overhead percentage, production quotas, client referrals, and employee retention percentage. Individual metrics are tied to personal performance goals.While Targeted KPIs can achieve good results, down sides do exist:
-Miscalculations; KPI improvements sometimes do not sufficiently offset failures in other areas, leading to incentive payments even though profits are off the mark.
-“Gaming”; some employees may learn how to play the system and achieve KPIs without hitting profit goals, resulting in intentional or unintentional failure to achieve profit objectives.
-“Sandbagging; there may be a few employees who barely reach their targeted KPIs during the allotted time period, and then attempt to carry-over performance into the next period, leading to failure to achieve full profit potential.
-Misalignment; KPIs can sometimes force employees into action outside their skill sets and abilities. The KPI may be achieved, but job satisfaction could be diminished.A single solution to designing an incentive plan with universal effectiveness simply does not exist – measures and metrics must be suitable and specific to the company and industry and based on an organization’s culture, business model and goals. By making a decision about which incentive plan indicators works best for your company, staying the course and tweaking when needed, the results in terms of both profitability and employee commitment will be evident.
About our Benefits Installment Author: .jpg)
James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”
In order to appropriately establish measures for a comprehensive incentive plan and determine which core approach will be taken to develop a program, company executives must first understand and embrace a few foundational principles.These foundational principals boil down to three goals – creation of an incentive plan that not only improves profits but is also drives results and is self-financing (paid for with results realized). These principals pilot two basic approaches that company executives should consider in the development of incentive plan indicators – Profit-Based Allocation and Targeted Key Performance Indicators.We’ll concentrate on Profit-Based Allocation for this month’s posting, and have Targeted KPI’s to look forward to next time.Under the Profit-Based Allocation method, a company decides that it will allocate a percentage of annual profits to employees; the award amount is divided among employees based on a pre-determined formula with payouts typically occurring at the end of the year.A “best practices” framework for a Profit-Based Allocation should address the following issues:-Define profits, be it net income or another measure-Establish a baseline upon which contributions to the profit pool will be based-Identify a threshold to ensure that a certain measure or series of measures will be achieved prior to payments being made-Select a fixed or tiered percentage to share -Select an allocation formula to determine how the value will be distributed to participating employees-Establish a personal performance component to clarify the performance threshold that must be achieved to receive benefitsKeep in mind that since the single focus of Profit-Based Allocation is on annual profits, the value created can lead to some inherent drawbacks. Some examples might be: long term needs are overlooked, individual accomplishments are not recognized and it can be possible to “cook the books” shorterm to impact a bonus. Seeing that this approach has its anchor in company performance, the absence of a strong performance management system or an apathetic workforce can compromise the effort.Next month we’ll examine Targeted KPIs and how they can lead to improvement in profits.About our Benefits Installment Author: James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”
If you or your company have participated in an Employee Engagement Survey like this one in the last couple of years, we would love to hear from you as your feedback is important to us and to those who are interested in our services.New market research suggests both companies and employees are increasingly aware of a definite shift in fiscal, professional, and personal priorities. Undoubtedly, you have seen and felt their impact on your business and professions as well. This shift has and continues to affect the following: - Need for flexible or non-traditional work schedules- Need for more "modern" work conditions- Need for meaningful and measurable accomplishments- Need for personal recognition and validation- Need for professional growth- Need to identify with the organization, etcWe, therefore, invite you to write a little comment or article to our editorial staff so we as well as others viewing this blog can grow from your experience. Our Staff will review your submission and we will gladly publish them on this blog along with your photo and a brief biographical reference if you want.Lastly, feel free to contact us if you are interested in receiving our complimentary current research compilation on the topic of the above mentioned shift in employee engagement.
Also, please feel free to take a look at one our Employee Engagement Surveys available here. Receiving these survey's results may be of interest to you. We can send them to you, if you would like. It's a free report.
It doesn’t make much difference as to the size of a company – exit interviews invariably reveal the same basic reasons for most employees’ departures: lack of confidence in where the business is headed; a sense of not fitting in within the organization; uncertainty about their future/career path within the organization; and a better financial opportunity elsewhere.Ultimately what most employees want is a workplace that will provide a compelling future, a positive environment, opportunities for growth and financial rewards. And while a progressive company can likely provide all those elements to some degree, the trick is in striking the right balance in each of these areas without cultivating an entitlement mentality among employees…regardless of how talented or valuable they are to the company.So, how can business owners and human resource heads avoid the dreaded entitlement mindset? By creating a unified vision for the company, and in so doing establishing an ownership mentality among employees.In companies where an ownership mindset has emerged, there is an across-the-board sense of what 
really matters. Employees have a clear understanding of where the company is going and embrace a commitment to its success. But that understanding doesn’t come as a result of a couple “pep talks.”Good employees invest their time and talent in helping a business achieve its goals because they understand all implications of the company’s goals; they truly believe the company will achieve those goals; the company’s goals are important to them; they see how they can make a contribution to the goals of the company; and they see the connection between the company’s goals and their own.The path to an ownership mentality is created through several steps:- Communicating a vision for the company’s future
- Spelling out strategy and business plans
- Defining specific opportunities for key individuals
- Maintaining open channels of communication
- Setting clear pay standards
- Sharing the wealth to further underscore employees’ investment in the company’s success
- Balancing short and long-term incentive rewards
It all comes down to understanding, importance, belief, contribution and connection. When these elements are in place and embraced, employees are working within an ownership framework, making it much easier for them to stay than leave.About our Benefits Installment Author: James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”
Today we are putting up a beta HR-Meter Employee Engagement Survey to collect some basic benchmark data on these modules.If you've got a couple of minutes and are interested in filling out an interesting survey concerning employee statisfaction then click here.You'll even get an opportunity at the end of the survey to request that the results be sent to you when they become available.Click here to fill out the new Employee Engagement SurveyIf you have any comments or suggestions on how we could improve this survey, please let us know!
It may be 10 months or 10 years since starting your company, but somewhere along either that short or longer road you have come to realize the culture that distinguishes your business isn’t up to par with your vision and expectations.Defined by the values and practices shared across-the-board by staff, company culture is essentially the manner in which an organization exhibits behavior. And while every company culture contains some elements of uniqueness, all have two basic qualities – character and personality.Company character is a reflection of the commitment and engagement employees have to an organization’s value system; company character becomes evident in numerous areas, including customer responsiveness, innovation, team interaction and daily job performance.Company personality is somewhat less tangible, presenting itself in the attitude and tone exhibited by employees. As examples, some organizations are known for their open and friendly aura while others are best described as competitive. One is not necessarily better than the other; businesses can have a successful personality if built upon the right character foundation.
Be advised – if you’re looking to re-define your company’s culture, it won’t happen overnight. Certain steps must be carefully taken in order to build a high performance culture.First, identify the results you want to achieve. How do you want your company to be perceived? Isolate the potential obstacles that might impede your company culture vision and work toward their elimination while establishing the strengths upon which you can build right now.It’s vital to clearly communicate your plan. Make sure your entire executive team and all employees understand your vision, and then seek their feedback. This important information will help, not hinder culture creation.Build a rewards structure that reflects your culture model, including mission, values, strategy, roles and expectations and then foster that structure to best advantage.High performance cultures can translate into company value that can exceed that of competitors and often even your own expectations. But this cannot occur in the absence of commitment and engagement from everyone within your organization – starting at the top with you.About our Benefits Installment Author:.jpg)
James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”
A friend and associate, Bill Burnett, has just published a book.The Peak Interview
New insights into the job interview process can give you an edge to win the interview and get the job. By the time you get to the job interview, the company has determined you are qualified for the job. But so are all the other interviewees. Your experience, skills, competencies, and abilities will not differentiate you. Your competition is just as qualified as you are. You need an edge.
The Peak Interview talks about how to create that edge using Nobel Prize winning insights.
Read more about this small book at: SuperinnovatorAbout the author:With more than thirty years of business experience, Bill Burnett is a problem solver and a proven leader. He has led both line organizations larger than 250 people, and staff groups with less than ten people. Burnett's special talent is his ability to recognize and leverage hidden inventiveness of knowledgeably internal employees. His track record of building and leading problem solving teams at both the global and local level has delivered ingenious performance improvements in Product Development,Business Models, Customer Service, Operations, Network Infrastructure, Systems Functionality, and Policy Management. Burnett has traveled to and worked with a multitude of cultures in local businesses in over sixty-five countries.
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James E. (Jim) Moniz, CEO of Northeast VisionLink, a Massachusetts firm that specializes in structuring executive compensation. James E. Moniz is a national speaker on the topic of wealth management and on executive compensation. Jim Moniz will be presenting at this years SHRM conference in Phoenx, be sure to check out our presentation: “Creating and Sustaining a Competitive Advantage, The Role and Impact of Effective Compensation and Rewards Strategies”
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