Ideally, everyone has a combination of compensation they receive for showing up to work (base salary and benefits), plus incentive pay in addition to that. 

We want 100% effort and zero excuses.

We suggest your company pay people fairly – and without limit - based on their performance. 

Pay your people with a purpose. 

We call this incentive pay, but it is also referred to it as “total pay,” “variable pay,” “synchronized pay,” and/or “pay for performance.” 

It has been estimated that 80 percent of companies offer some type of pay-for-performance program, which is a performance-related award that must be re-earned each year and does not increase base salary.

WARNING:  Do not be greedy.  Define a plan where your Company makes more money when your people perform better and then be grateful when they earn more… even a lot more, because that means your company is also earning significantly more. 

Always introduce a new incentive program as a pilot.  This sets the expectation that it is a test, not a guaranteed program for the foreseeable future. 

During the pilot, you guarantee their current full income if you are adjusting their base pay down and shifting those dollars into part of their incentive pay.

Here is an example of how greed corrupts incentive pay. 

The Harvard Business Review had a story about a division within a Fortune 100 company that tried an incentive pay plan. 

The managers launched a program of team goals coupled with team-based pay with three possible levels of reward. 

The managers projected that 90 percent of the teams could reach Level 1, 50 percent could reach Level 2, and only 10-15 percent reach Level 3 (the highest).

For the first six months, everyone loved the system and worked harder than ever. 

The result was the majority of teams reached Levels 2 and 3. 

The company benefited from greater productivity and probably profits. 

However, the compensation that had to be paid was greater than expected by the managers.

The managers had no intention of rewarding people for improved performance but just wanted to pay less for weak performance. 

Rather than compliment the employees that reached Levels 2 and 3, the managers adjusted the goals upward to unreachable heights. 

Too many of the objectives were affected by situations out of the control of workers, so the goals could not be achieved. 

Workers became upset and disillusioned. 

Shortly thereafter the managers killed the system. 

Apparently, their core objective was not to pay people more;  it was only to work people harder.

The foundation of any incentive pay plan is trust. 

Employees must trust management to pay as promised and give them authority that matches their responsibilities so they can achieve results.

One example of a dynasty built on incentive pay is Nucor Steel, the largest steel company in the world. 

Employee relations at Nucor are based on four simple principles:

1. Management is obligated to manage Nucor in such a way that employees will have the opportunity to earn according to their productivity.

2. Employees should feel confident that if they do their jobs properly, they will have a job tomorrow.

3. Employees have the right to be treated fairly and must believe that they will be.

4. Employees have an avenue of appeal when they believe they are not treated fairly.

The amount of incentive pay is determined by the minimum employees are paid to show up at work and how well they achieve clear, measurable financial results individually and/or as a company. 

If your base compensation is lower than average, then your incentive pay can be much higher. 

For instance, some Nucor incentive pay is 80-150% or more of an employee’s base pay.

Our Company believes everyone needs to commit to 100-zero performance:  Each of us takes 100% responsibility to make our Clients and coworkers happy, and there are no excuses.

The payout of our incentives is by the end of the month following the close of the incentive period (month, quarter, or year).  

For example, your Q1 incentive is paid by the end of April.

The key to a successful incentive pay program lies in finding a balance between fair compensation and performance-based rewards.  It's important for companies to create these programs with transparency and integrity so that employees trust the system and are motivated to perform well.

Nucor Steel's example demonstrates how transformative the results can be when management genuinely supports their employees' efforts.  On the other hand, when greed overshadows fair compensation, it leads to disillusionment and undermines the purpose of incentive pay.

By embracing a culture of 100% accountability and zero excuses, companies can cultivate a productive and positive work environment that benefits both employees and the organization as a whole.

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