What are the "critical performance factors" we should consider, while designing "annual cash incentive scheme" for a TEAM (any function)?

Design success factors

Although none of the factors outlined below will surprise you, and any reward specialist will offer a very similar set of design criteria, they are crucial to the success of the plan you intend to design and implement. As you embark upon designing a new scheme in broad terms the sorts of questions you should be asking to determine the design principles are:

1.  Why does the Company need to reward performance through an incentive?

• What specific business performance are you looking to drive?
• Is there a set of common design principles that can be applied?
• Which employees will participate?

 2.  What specifically does the Company want to reward?

• Improved financial performance
• Specific behaviours
• Improved competence
• Adherence to Company values

Once you have the answers to these questions you will have a pretty good set of design principles, which you can then use to create a detailed design framework. The design framework provides the basic skeleton upon which you will base the scheme and its operation.

Design framework

At the next level of design you should concentrate on how the scheme will operate, who will participate, the targets & measures and of course the communication and payment details. In essence you need to establish:

• What is the basic type of plan proposed?
• Commission, annual bonus or a variation of these?
• Who participates?
• Which employees will participate in this plan & what governs participation?
• Is it determined by the role undertaken, the grade / level within the organization or is it at the discretion of the company?

3.  How will the plan be funded?4.  What will the plan pay?5.  Measures & targets?6.  Assessment & calculation?7.  Communication?8.  Rules & regulations?9.  Implementation?

10.What is happening today?

11.Establish Opinions

12.Review options & Establish external activity

13.Reward design and options

14.Detailed reward design & modelling

15.The benefits of getting it right

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I believe that you should start at looking at the team's functions and required outputs/results.  This should guve you clues as to what is the building blocks that is required to achieve the team's desired results.  For example, is the team is required to sell20 items per month, then they would be required to collect at least100 names of potential clients (for example), call these customers and make at least60 appointments which will result in20 sales.  The CPI's would therefore be in my example, to ensure at least100 customer contacts to be collected and60 appointmens to be made, to make20 sales of a value of AEDx per month.

The second part of the incentive is to determine what portion of the income/cost savings/added value so generated can be appropriated to the incentive scheme.

In my experience it is better to incentivise teams, rather than individuals, to ensure that the entire team work together to achieve the desired results, with the exception where individuals perform their duty seperately from teams.  In other words the team shares, in a predetermined and pre-arranged manner, the "bonus" if all the CPI's are achieved.