- Too many measures
“Less is more” when determining the criteria or metrics to use in the plan. Plans with 3 to 5 measures can provide balance and focus. Too many measures dilute a participant’s attention and motivation.
- Metrics with a weight less than 10% of the total
One of the signs of too many measures is when a measure is weighted to be less than 10% in calculating the incentive. For most participants, a measure that is less than 10% adds very little to individual earnings and so they are easily ignored.
- Setting goals that are difficult to evaluate differences in multiple levels of performance
For each measure, goals are set. Goals are most effective when the manager and the employee knows when performance has been achieved, has been under achieved and over achieved and how the payouts align with those levels. Binary or yes/no goals present a significant issue for the incentive plan participant. What happens if there is over achievement or the results were actually close to the achievement or “yes” level but not quite?