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March 27, 2010
Organizational Incentives That Are Too Small or Unfairly Handled

Dan Kleinman discusses common incentive-related mistakes in a BLR webinar entitled ‘Incentive Pay: Best Practices for Designing and Managing Pay-for-Performance Plans’. Kleinman mentions the mistake of providing organizational incentives that are too small and the mistake of having incentive pay processes that are not fairly handled. He provides the following points that employers should note about incentives that are too small:

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  • In today’s post-recession world, you must try not to pull back the incentives throttle beyond the point that your bonuses truly attract the attention of your workers
  • The strategies to avoid this problem will vary, depending on the nature of your workforce, but you may be able to combine smaller incentives into a larger reward or find other dollars in your budgets to beef up the current incentives
  • Whatever you do, the key is offering incentives that energize your employees without making them so large that they cause unintended problems

The following points should be noted regarding the mistake of unfairly handled incentive pay plans:

  • Nothing will kill an incentive pay plan faster than the notion among your workers that the process isn’t fair e.g., supervisors play favorites in giving out bonuses, do a terrible job evaluating workers’ progress toward performance goals, or just throw up their hands and give everybody the promised incentives regardless of individual efforts
  • Nip such complaints in the bud by investigating them and correcting any problems you find immediately

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

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