- Employees struggle to identify the link between their actions and the short-term incentive plan (STIP), resulting in payouts that do little to focus employee behavior or drive a pay-for-performance culture.
- A STIP is a key part of the Total Rewards offering and is critical to compete for talent in today’s tough labor market.
- Many STIPs incorporate too many performance measures, overcomplicating the plan and making it nearly impossible for employees to understand.
- Your STIP can’t be everything to everyone – align the plan with key organizational objectives to highlight behaviors for success.
- Leverage modeling to identify and mitigate risk inherent in performance measures to avoid unforeseen consequences of a STIP.
- Balance administration with customization. While it is important to divide your employee population into logical segments to design relevant STIPs, creating multiple STIPs can be unwieldy to administer.
- Translate “compensation speak” into clear everyday language so that all participants comprehend the STIP. For a STIP to direct employee behavior in the manner intended, managers and employees need to understand it.
Impact and Result
- Use McLean & Company’s four-step process to design a customized STIP that focuses on the achievement of organizational objectives, while also incorporating line of sight for employees.
- Keep it simple – this will ease the administration, comprehension, and communication of the STIP.
- Monitoring, adjusting, and reviewing regularly are critical for the ongoing success of a STIP.
Short-Term Incentive Plans
This program has been approved for continuing professional development (CPD) hours under Section A of the Continuing Professional Development (CPD) Log of the Human Resource Professionals Association (HRPA).
McLean & Company is recognized by SHRM and can award Professional Development Credits (PDCs) for the SHRM-CP® or SHRM-SCP®.
HR Certification Institute’s® official seal confirms that McLean & Company meets the criteria for pre-approved recertification credit(s) for any of HRCI’s eight credentials, including SPHR® and PHR®.
How to complete this course:
Use these videos, along with the Project Blueprint deck above, to gain an understanding of the subject. Start with the Introduction, then move through each of the Course Modules. At the end of each Module, you will be required to complete a short test to demonstrate your understanding. You will complete this course when you have completed all of the course tests.
- Number of Course Modules: 5
- Estimated Completion Time: 1.5 hours
Describe at a high level how to design a short-term incentive plan and how to overcome/mitigate any challenges and risks.
By the end of this course, learners will be able to:
- Explain the challenges facing short-term incentive plans and the importance of aligning a plan with key strategic objectives.
- Recall the design elements of a short-term incentive plan.
- Discuss the various risks inherent in short-term incentive plans and how to mitigate them.