Pay for Performance

“You get what you incentivize”    –Peter Diamantis, Founder: X-Prize Foundation

Employees are a company’s most valuable asset, but motivating them to perform their best can be challenging. To get the most from your employees, consider implementing performance based incentives, also called “pay for performance”, a method in which employees are rewarded for completing their various tasks within a certain amount of time and quality level. Get rid of the attitude “they should do it anyway”. Just as you would never see a football game without a score board, you wouldn’t compensate sales employees by “expecting” them to hit a benchmark and then not compensating after they exceed it.  Everyone is motivated by success. Why not do the same thing for labor costs?

The key point with employee incentives is to align the incentive for the employee with the goals of the company and be careful of unintended consequences.  If you incentivize solely for productivity, a consequence may that quality suffers or bottlenecks develop in production.

If designed properly, performance based incentives can dramatically transform an organization’s productivity.  

80% OF OUR CUSTOMERS HAVE INCREASED PRODUCTIVITY BY OVER 25% WITHIN THE FIRST 6 MONTHS LIVE ON THE SERVICE.

A successful incentive program meets the following criteria:

1. EMPLOYEE ENGAGEMENT

Employees have to believe in the program, that it is fair, and that it accurately reflects their abilities and effort. There is a direct correlation between the employees work level and the incentives they earn. Bonusing production employees on the profit of the company often will not work because many of the factors that affect profitability lay outside of their control.

2. ACCURATE AND FAIR PERFORMANCE TARGETS

True employee engagement requires performance incentives.  The challenge for the company, though, is knowing how to compile all of their data to build such a program. You will need accurate activity based cost accounting and employee performance standards to build a long term, profit driven employee incentive program. We can handle this challenge for you. The Easy Metrics algorithm calculates the standards and performance targets.

3. THE SELF-FUNDED INCENTIVE PROGRAM

Employee incentive programs that cost money are doomed to failure, and we believe increasing your costs defeats the purpose of the program. That’s why the Easy Metrics employee incentive programs are 100% self-funded through productivity increases.

Cost Driven Incentive Programs are the key to a hyper productive work force. Once you define your performance standards and cost accounting with the Easy Metrics tools, we help you design a self-funded employee incentive program to turbo-charge your work environment.

Employees Are Motivated to Help Reduce Costs

Every Easy Metrics employee incentive program happens this way: employees themselves help you reduce your costs and they get a piece of it. The more they reduce costs, the more they make. Then, the goals of employees are in alignment of goals of company. Suddenly, the employees  – not the managers – are driving the productivity in your work environment.

INCENTIVE PROGRAM EXAMPLE:

YOUR GOAL IS TO REDUCE PER UNIT COSTS.

YOUR CURRENT COST PER UNIT $1.

IF YOUR EMPLOYEES CAN REDUCE COSTS TO 80 CENTS, ARE YOU WILLING TO GIVE THEM 6 CENTS PER UNIT AS A BONUS?

Dangers of Badly Designed Employee Incentive Programs

We commonly see this scenario: A company dives into an employee incentive program without detailed cost accounting. They mean well, but their employee incentive program actually increases their costs. The employees are happy they are getting paid more, and morale is up. But then the CFO sees it and pulls the plug on the money-losing sinkhole. Employees who were motivated, now feel jilted. Employee morale is collapsed – and even worse – trust in the organization is at a low.

Expert Incentive Program Design Assistance

With our 20 years of experience designing employee incentive programs, we give recommendations on ideal incentive programs to accomplish your company goals. Easy Metrics software is configurable to account for your goals (quality, cost, time, etc) to align employees and manager with the goals of the organization. All of this is built into the service model of Easy Metrics. It is included at no additional charge.

Call us to to see how Easy Metrics can help you easily define a self funded employee incentive program that reduces costs and increases worker productivity.