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March 27, 2010
Measuring Your ROI for Awarded Incentives

In a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’, Dan Kleinman provides steps and recommendations organizations can follow in managing incentive pay plans and one step is to find ways for the organization to measure its Return on Investment (ROI) for incentives that have been given to employees. Kleinman also provides the following information regarding measuring ROI for incentives:

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  • In discussing ’Why Incentive Programs Endure Recessions’, the Incentive Performance Center states that ‘When compared with advertising, direct marketing and event marketing, well-designed incentive programs have by far the highest level of cost accountability related to results’
  • The key to measuring the bottom-line value of your incentive pay plans is this: Start with clear, measurable goals – and, then, set your rewards accordingly
  • When you do the above, you will have demonstrable results (e.g. sales gains, fewer on-site accidents, etc.) that are used to decide whether employees have earned the incentives
  • If you take the dollar value of these added revenues or improved performance levels, and subtract the cost of the incentives, you will see firsthand the positive impact of your incentives program in black and white

Dan Kleinman is the principal of Dan Kleinman Consulting, a California-based compensation and human resource consulting firm. He can be reached at info@dankleinmanconsulting.com.

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