UPFRONT Unearned rewards?

How closely are incentive bonuses tied to performance? Not very, according to new survey exploring company use of performance incentive schemes.
It found that 70 percent of responding companies do offer performance bonuses to executive managers. But nearly half of these are paid out even when the performance targets aren’t fully met.
That seems little counter productive, according to Kevin McBride, human resources and remuneration specialist whose company McBride HR carried out the survey.
“We find it surprising that any remuneration programme aimed at rewarding high performance is structured in way which effectively rewards people who do not meet required performance levels.”
Of the 200 companies surveyed, 70 percent had bonus programmes, about half as many again had profit share programmes for senior staff and fifth had both schemes in place. And 45 percent paid out to senior staff who achieved only 80 percent of performance targets.
That somewhat undermines the purpose of the incentive schemes and could help explain the low overall average of payments, says McBride.
The beauty of incentive schemes is that they help raise levels of remuneration in New Zealand with the advantage they only incur costs when company’s performance is there to justify it.
“The widespread use of these schemes is step in the right direction but there does appear to be lack of understanding of how bonus and profit share systems can help underpin performance. Human nature being what it is, people will not be motivated to achieve targets if bonuses and profit share programmes are kicking in at 80 percent achievement.”
He says incentive programmes require companies to have robust performance measures in place and readiness to be flexible if circumstances require.

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