Eddy’s HR Mavericks Encyclopedia
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Group Incentive Plan
Your company has goals. Those goals hinge on employees. Employee motivation hinges on you. So… where do you start? Here’s the group incentive plan breakdown you’ve been looking for.
What Is a Group Incentive Plan?
A group incentive plan rewards a group of employees who have achieved a goal. This form of incentive is used to increase the productivity of a team in order to achieve a specific goal.
When Should Group Incentive Plans Be Used?
Group incentive plans should be used when success is dependent on the whole rather than the individual. Moreover, when there is a goal that can only be reached by the collective efforts of a group, incentivising indirectly usually makes more sense than incentivising directly in cases where individual performance cannot feasibly be measured.
Individual vs Group Incentive Plans
Whereas a group incentive plan depends on the collective success of a group, an individual incentive plan’s focus is on the success of individuals. This type of individual incentive plan rewards individuals for their performance, despite the success (or lack thereof) of their department or team as a whole.
Advantages and Disadvantages of Using Group Incentives
The pros and cons of utilizing a group incentive hinges on the situation and aim. Here’s what to take into consideration.
Group Incentive Plan Advantages
- Builds comradery. Many people working towards a singular goal can be very unifying. In cases of collective group effort being rewarded, each individual gains vested interest in helping one another for the good of the whole.
- Improves engagement. When the group’s goal is measurable and obtainable, it encourages an understanding of said goals and how to get there. Additionally, when a company is loyal in rewarding its employees, that loyalty becomes reciprocated.
- Motivating for multiple reasons. Where some individuals may not hold interest in the reward presented, they may find motivation in seeing their coworkers succeed. For this reason, a group incentive can have a wider motivating reach than individual incentives.
Group Incentive Plan Disadvantages
- Might not be motivating to everyone. When offering a singularly defined reward to a variety of different personalities, you’re likely to find that the reward offered will highly motivate some but not others. For example, someone who is highly self-driven may not see the point in exerting themselves if they don’t believe the team will succeed as a whole. This is why it is so important to understand what rewards will pique the most interest for the most workers. See the “Outline the Budget, Details, and Rewards” section below.
- More preparatory work. Just as with anything of scale, group incentives involve a lot of research, surveys, compiling data, administrative paperwork, budget determination, mapping out eligibility, etc.
- More room for error. As a group incentive plan involves many details, technicalities and moving parts, there is more room for potential error.
Types of Group Incentive Plans to Consider
There’s a multitude of different group incentive plans to consider. When selecting plans for your company, keep your audience in mind and select what will appeal the most to them.
Gain-Sharing
Gain sharing involves setting specific measurable goals and offering extra compensation upon goal completion. For example, the city of Loveland in Colorado implemented a gain-sharing program that defined three criteria that needed to be met for employees to be given extra compensation. The city revenues had to exceed expenses, expenses had to be equal to or less than the previous year’s expenses, and responses to a citizen satisfaction survey had to meet minimum requirements.
Merit-Based
This is where employees are rewarded for meeting or exceeding performance during a given time period. Rather than a set pay increase that occurs annually, the increase is based on group-wide measurable improvements of overall performance.
Profit-Sharing
Profit-sharing is a pay-for-performance strategy that focuses on rewarding employees in accordance with the company’s overall performance. In other words, the pay the employees receive scales with the profits of the organization.
Non-Cash
This category of group incentives offers non-monetary rewards. Though these incentives can be less expensive than paying out your employees directly, they can still be costly to the employer. Some examples include group-wide recognition, PTO, company stocks, team vacations, and the like.
How to Design and Roll Out Group Incentives in Your Organization
Once you’re prepared to take action, remember that the devil is in the details. Just as important as the incentive(s) you select is how to present your incentive plan to your employees.
Step 1: Do Your Homework
Gather a thorough understanding of local and national laws surrounding compensation. Be mindful of any eligibility rules that may violate employment laws. Gather data to determine what types of rewards and goals your employees find most motivating. As the ultimate success or failure of your incentive plan hinges on the interest of your staff, how well you complete this step can make or break the entire plan.
Step 2: Define the Aim and Eligibility
Clearly define the goal you are trying to meet. It needs to be detailed and SMART (specific, measurable, achievable, relevant, and time-bound). Which employees are or are not eligible for this incentive needs to be precise and clear.
Step 3: Ready, Set, Roll Out!
Ensure your upper management is all on the same page regarding the qualifications, rewards, budget and all other details. Create hype by setting an unveiling date and beginning a countdown. Offering mini-bonuses or raffle rewards leading up to it draws employee attention. Hold an all-hands meeting where the details of the incentive plan are laid out clearly. Have printed overviews ready to hand out in person as well as an email overview sent out to all eligible staff members.
Step 4: Follow Up and Follow Through
Schedule periodic reviews and track any measurable changes in productivity. It’s also wise to collect insights from management and survey data from the staff throughout the rollout. What if the goal is not met? Consider rewarding the effort. Don’t pay out the reward reserved for the unmet goal, or you might find future incentives less effective. For example, if you witnessed an entire team coming in early/staying late to complete a project that ended up not meeting the performance goal defined in the incentive plan, recognize their dedication and effort anyhow. It can be beneficial for employee loyalty and morale if their time and energy invested towards the goal is still recognized and praised.
Topics
Kayla Farber
Kayla is the Chief Innovation Officer at Hero Culture, where the passion is to create company cultures of retention using the power of personality.
Frequently asked questions
Other Related Terms
Eddy’s HR Mavericks Encyclopedia
Group Incentive Plan
Your company has goals. Those goals hinge on employees. Employee motivation hinges on you. So… where do you start? Here’s the group incentive plan breakdown you’ve been looking for.
What Is a Group Incentive Plan?
A group incentive plan rewards a group of employees who have achieved a goal. This form of incentive is used to increase the productivity of a team in order to achieve a specific goal.
When Should Group Incentive Plans Be Used?
Group incentive plans should be used when success is dependent on the whole rather than the individual. Moreover, when there is a goal that can only be reached by the collective efforts of a group, incentivising indirectly usually makes more sense than incentivising directly in cases where individual performance cannot feasibly be measured.
Individual vs Group Incentive Plans
Whereas a group incentive plan depends on the collective success of a group, an individual incentive plan’s focus is on the success of individuals. This type of individual incentive plan rewards individuals for their performance, despite the success (or lack thereof) of their department or team as a whole.
Advantages and Disadvantages of Using Group Incentives
The pros and cons of utilizing a group incentive hinges on the situation and aim. Here’s what to take into consideration.
Group Incentive Plan Advantages
- Builds comradery. Many people working towards a singular goal can be very unifying. In cases of collective group effort being rewarded, each individual gains vested interest in helping one another for the good of the whole.
- Improves engagement. When the group’s goal is measurable and obtainable, it encourages an understanding of said goals and how to get there. Additionally, when a company is loyal in rewarding its employees, that loyalty becomes reciprocated.
- Motivating for multiple reasons. Where some individuals may not hold interest in the reward presented, they may find motivation in seeing their coworkers succeed. For this reason, a group incentive can have a wider motivating reach than individual incentives.
Group Incentive Plan Disadvantages
- Might not be motivating to everyone. When offering a singularly defined reward to a variety of different personalities, you’re likely to find that the reward offered will highly motivate some but not others. For example, someone who is highly self-driven may not see the point in exerting themselves if they don’t believe the team will succeed as a whole. This is why it is so important to understand what rewards will pique the most interest for the most workers. See the “Outline the Budget, Details, and Rewards” section below.
- More preparatory work. Just as with anything of scale, group incentives involve a lot of research, surveys, compiling data, administrative paperwork, budget determination, mapping out eligibility, etc.
- More room for error. As a group incentive plan involves many details, technicalities and moving parts, there is more room for potential error.
Types of Group Incentive Plans to Consider
There’s a multitude of different group incentive plans to consider. When selecting plans for your company, keep your audience in mind and select what will appeal the most to them.
Gain-Sharing
Gain sharing involves setting specific measurable goals and offering extra compensation upon goal completion. For example, the city of Loveland in Colorado implemented a gain-sharing program that defined three criteria that needed to be met for employees to be given extra compensation. The city revenues had to exceed expenses, expenses had to be equal to or less than the previous year’s expenses, and responses to a citizen satisfaction survey had to meet minimum requirements.
Merit-Based
This is where employees are rewarded for meeting or exceeding performance during a given time period. Rather than a set pay increase that occurs annually, the increase is based on group-wide measurable improvements of overall performance.
Profit-Sharing
Profit-sharing is a pay-for-performance strategy that focuses on rewarding employees in accordance with the company’s overall performance. In other words, the pay the employees receive scales with the profits of the organization.
Non-Cash
This category of group incentives offers non-monetary rewards. Though these incentives can be less expensive than paying out your employees directly, they can still be costly to the employer. Some examples include group-wide recognition, PTO, company stocks, team vacations, and the like.
How to Design and Roll Out Group Incentives in Your Organization
Once you’re prepared to take action, remember that the devil is in the details. Just as important as the incentive(s) you select is how to present your incentive plan to your employees.
Step 1: Do Your Homework
Gather a thorough understanding of local and national laws surrounding compensation. Be mindful of any eligibility rules that may violate employment laws. Gather data to determine what types of rewards and goals your employees find most motivating. As the ultimate success or failure of your incentive plan hinges on the interest of your staff, how well you complete this step can make or break the entire plan.
Step 2: Define the Aim and Eligibility
Clearly define the goal you are trying to meet. It needs to be detailed and SMART (specific, measurable, achievable, relevant, and time-bound). Which employees are or are not eligible for this incentive needs to be precise and clear.
Step 3: Ready, Set, Roll Out!
Ensure your upper management is all on the same page regarding the qualifications, rewards, budget and all other details. Create hype by setting an unveiling date and beginning a countdown. Offering mini-bonuses or raffle rewards leading up to it draws employee attention. Hold an all-hands meeting where the details of the incentive plan are laid out clearly. Have printed overviews ready to hand out in person as well as an email overview sent out to all eligible staff members.
Step 4: Follow Up and Follow Through
Schedule periodic reviews and track any measurable changes in productivity. It’s also wise to collect insights from management and survey data from the staff throughout the rollout. What if the goal is not met? Consider rewarding the effort. Don’t pay out the reward reserved for the unmet goal, or you might find future incentives less effective. For example, if you witnessed an entire team coming in early/staying late to complete a project that ended up not meeting the performance goal defined in the incentive plan, recognize their dedication and effort anyhow. It can be beneficial for employee loyalty and morale if their time and energy invested towards the goal is still recognized and praised.
Topics
Kayla Farber
Kayla is the Chief Innovation Officer at Hero Culture, where the passion is to create company cultures of retention using the power of personality.
Frequently asked questions
Other Related Terms
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