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Incentive compensation tips and pitfalls shared

BY Stephen Miller

Orlando, Fla. — Incentive compensation should directly communicate an organization’s objectives to employees, so why do so many plans fall short of success? In presentations at the 2012 WorldatWork Total Rewards Conference here May 21 to 23, 21012, compensation specialists shared lessons on the effective use of incentive pay programs and warned of errors to avoid.

“First, determine the business strategy and objectives that incentives are intended to drive,” advised Jason Adwin, senior consultant at Sibson Consulting. “The role of incentives is to motivate and engage employees in order to drive intended business results, and reward and differentiate employees fairly for the value they create,” he noted. “Some employees are going to give above and beyond, with or without incentives. But the program, by sharing their success stories and modeling their behavior, motivates the others.”

“Know what you provide vs. the market and use it to your advantage” for recruiting talent and ensuring engagement among employees, recommended Elyse Lyons, senior consultant at Sibson Consulting, who co-presented with Adwin.

Confusing metrics

According to Lyons, incentives don’t work when they become an entitlement, leaving employees disappointed if incentive levels decreases from one year to the next.

Another pitfall: confusing metrics with no clear line of sight, requiring multiple Excel spreadsheets to explain and track. “Employees should be able to figure out the incentive plan on a paper napkin,” Lyons argued.

Also beware of plans that demotivate high performers through insufficient differentiation, and misaligned efforts that result when teams have conflicting incentives. “One sign of misalignment is when c-suite executives earn incentives and middle management doesn’t,” Adwin noted, adding, “When individual, department and organizational incentives align, employees can see how their actions help the organization to succeed.”

Everyday excellence

Another common mistake, Adwin pointed out, is requiring effort beyond everyday job responsibilities to earn incentive pay. Instead, incentives should reward excellent performance within an employee’s normal job duties if that performance is an outsized contribution to the organization’s success.

Bonus amounts that don’t seem large can change behavior for the better, Lyons noted. She related how when the former Continental Airlines wanted to improve its poor on-time departure record, the airline began offering a flat bonus of $65 a month to members of crews with the best on-time departures. As a result, pilots started helping flight attendants clean up plane cabins to ensure timely departures.

“Train your managers to explain that, when incentives are not earned, ‘the performance of our business would not allow us to give the incentive you wanted,’ ” said Adwin.

During another session, Carrie Ward, director of consulting services at SalesGlobe, suggested informing employees’ spouses about incentive pay programs so they can encourage their spouses to strive for those higher rewards. “Send incentive program information to home addresses,” she recommended.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Have HR-related questions and concerns? Get access to essential forms, policies and guides, plus a live call center, at ToolkitHR.com, powered by HCN and the Society for Human Resource Management (SHRM).

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Contractor wins $2.5 million in nail gun case

BY Brae Canlen

A jury in San Bernardino Superior Court has awarded a contractor $2.5 million in a product liability lawsuit against tool manufacturer Hitachi.

Martin Oliver, a journeyman carpenter with 40 years of experience, was severely injured when the nail gun he was using, a Hitachi NR83A, discharged a nail into his head, penetrating his brain and leaving him permanently disabled.

The jury concluded that the nail gun was defective because it had a contact trip mechanism, which allows a nail to be fired when the nose of the nail gun is in contact with a surface and the trigger is pulled, regardless of the order in which those events occur. The fact that Hitachi’s gun didn’t have a sequential trip mechanism, which allows a nail to be fired only if the trigger is pulled after the gun’s nose contacts a surface, constituted a design defect, according to the decision.

Hitachi could not be reached at press time for comment. The plaintiff was represented by personal injury attorneys Roger Gordon and Vincent Vallin Bennett of Los Angeles.

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Vote on new LEED standards postponed

BY Ken Clark

Saying it needs to address concerns raised by members, core LEED users and stakeholders, the U.S. Green Building Council (USGBC) announced June 4 that it will delay balloting on LEED 2012 until June 1, 2013. (One caveat: The possibility also exists that the balloting could take place earlier in 2013 if USGBC members and the market indicate readiness for ballot, the announcement said.) Because of this date change, LEED 2012 is being renamed LEED v4.

In addition to the ballot date change, other actions include:

• Keeping LEED 2009 open for registration for three years;

• Continuing to ask for the market’s assistance in "test driving" LEED v4 to gain important insight during a time when improvements in usability infrastructure can be made; and

• Committing to a fifth public comment that will open on Oct. 2, 2012, and run through Dec. 10, 2012, to take advantage of Greenbuild, where USGBC will hold public forums and educational sessions on site in San Francisco. This will help stakeholders better understand requirements as well as any final changes that may appear in the new draft. Greenbuild will also serve as a platform to debut new forms, submittal documents and LEED online enhancements that will help improve and enhance the user experience

“This is 100% in response to our members’ desire that we give them a bit more time to absorb the changes in this next version of the rating system,” said USGBC president and CEO Rick Fedrizzi.  “We want to do everything we can to ensure that the market can fully embrace LEED v4 because it represents significant progress on carbon reduction and human health. Greenbuild will provide us the perfect venue to experience the look and feel of the new system as an integrated package. Then we can take the first part of 2013 to make sure the consensus body has everything it needs for a successful ballot.” 

For more information please visit usgbc.org/LEEDv4.

The U.S. Green Building Council’s LEED green building certification system is the foremost program for the design, construction, maintenance and operations of green buildings. Nearly 47,000 projects are currently participating in the commercial and institutional LEED rating systems.  In addition, more than 20,000 residential units have been certified under the LEED for Homes rating system, with nearly 80,000 more homes registered.

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