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March 28, 2010
Mistakes Regarding Organizational Incentive Pay Budgets

In a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’, Dan Kleinman discusses common incentive-related mistakes that organizations make. This includes not recognizing that incentive pay budgets may vary year to year and can mean that the same job performance goals could bring different rewards. The following issues should be noted about mistakes related to organizational incentive pay budgets:

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  • Tying your incentive levels to whether your organization is having a ‘good year’ or a “bad year” can brings its own set of problems
  • Workers can become discouraged if they feel their rewards depend more on the company’s fortunes than on the extra miles they’re going individually to hit the targets you’ve set for them
  • In post-recession economies, eliminating mistakes related to incentive pay, can be a tough challenge
  • Start by doing your best to keep incentive pay budgets consistent year to year
  • Beyond that simple point, you may need to review your incentive targets and adjust them up or down year to year, to match the incentive pay dollars you do have in hand each fiscal year to recognize workers

Dan Kleinman is the principal of Dan Kleinman Consulting (, a California-based compensation and human resource consulting firm. He has served as an independent consultant for a broad spectrum of regional, national, and international companies, providing compensation, performance, organizational planning, and reward-system design services. Dan Kleinman can be reached at

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