Targeting incentive compensation that works tougher than ever

Many businesses have a set way of doing things that has been in place for years. These functions have come to be accepted as industry standards in many cases, with professionals in specific lines of work expecting the same kinds of sales incentive compensation at any company where they hold the same position. The trouble with such ideas, though, is that they deter better work and competition . Thinking outside the box may be the best way for companies to overcome the malaise that workers otherwise fall into when they are not given a reason to do better.

One of the oldest compensation plans and the mostly widely known is the convention of tipping food service staff. This is considered a prime motivational tool for waiters and front-of-house staff in that they are rewarded by customers based on their quality of service and attentiveness. The only trouble with this, according to restaurateur Jay Porter, is that people rarely give bigger tips and employees change their attitudes to certain customers that they feel may offer them more money, neglecting other patrons.

Porter told Quartz that he changed the strategy in his San Diego establishment so that all parties paid a flat 18 percent tip on every transaction. That helped improve service and boost customer satisfaction, thanks to the promise of consistently higher pay taking the strain off servers. It also ensured that every table got the same level of attention, creating a more uniform dining experience and setting a new standard in the restaurant for how personnel handle diners.

Balancing income issues
Tipping is still a preferred form of incentive compensation management by many companies, though, because it lets employers pay their workforce a lower wage. The promise of higher pay is what encourages stronger performances and better productivity, these companies believe. That is what has made the U.S. the leader in cash compensation, despite some sources finding it may not be as effective as companies think.

Even deferral programs for top earners are largely based on this scheme, as Here Is The City wrote. The source stated that a compensation study of major banks found that American corporations only hold back about half of CEO earnings every year, while European organizations of the same nature retain almost three-fourths of a leader's pay. This compensation plan makes individuals at this level feel more compelled to stay with a firm and help the establishment do well. It could also be what has cost U.S. banks so much money without associated returns.