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April 17, 2010
Compensation 101: Individual Versus Group Incentive Plans

Individual incentive plans and group incentive plans both have a similar goal. They strive to provide an incentive that will drive the right kind of performance for the company. For the company to determine the best incentive options, they must first know their goals and ensure those goals are within the individual's ability to impact. In a BLR webinar titled "Compensation 101: Essential Secrets and Strategies for HR Professionals," Paul R. Dorf outlined some of the considerations when determining whether individual or group incentive plans are most appropriate.

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Individual incentive plans are based on meeting work-related performance standards, such as quality, productivity, customer satisfaction, safety, or attendance. They are most appropriate when:

  • Performance can be measured objectively
  • Employees have control over the outcomes
  • Plan does not create unhealthy competition

Individual incentive plans require monitoring, and it is important to remember that the incentive scheme is not a substitute for good management.

Spot bonuses can also be used for individuals to show appreciation or give recognition for a job well done. This can be a reward for developing new skills, contributing new ideas, obtaining licenses, or finishing projects early. Typically, a spot bonus is given as a one-time discretionary payment. These are most prevalent among non-executives.

Team or group incentive plans are a reward for collective performance. These are most effective when all group members have some impact on goals. The rewards can be equal or different for each member, but this requires an understanding of team dynamics. Be sure to avoid contrasting motivational forces.

Paul Dorf is the Managing Director of Compensation Resources, Inc. (CRI). CRI ( specializes in providing comprehensive Compensation and Human Resource consulting services. Dorf is responsible for directing consulting services in all areas of executive compensation, short and long term incentives, sales compensation, performance management programs, and salary admin programs.

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