Making Short-Term Incentives Work for Your Organization

Short-term incentive pay plans are widely used by Canadian organizations to drive organizational performance. A recent Conference Board survey sheds new light on the design, administration, and related challenges of these plans. Key findings include that organizations place significant weight on corporate-wide results when designing and measuring performance. In addition, an employee’s position within an organization greatly affects that person’s eligibility for short-term incentive plans as well as payouts from such plans—executives, for example, typically receive a higher proportion of their salary in short-term incentive pay than do employees at other levels. Although most organizations find it difficult to concretely measure the cost-effectiveness of their plans, they still believe these plans are at least somewhat effective in achieving the intended business objectives. Follow-up case studies revealed innovative approaches and adaptability in managing short-term incentive pay plans.