An incentive plan proposal should include the following:

  • Situation or background summary
  • Objective or purpose of the plan/program
  • Proposal, program or recommendation
  • Analysis of the advantages and potential adverse consequences
  • Cost justification
  • Timing of payouts


Some things to think about when developing an incentive plan:

  • Simple
    • No more than five elements
    • Calculation on each element must be easy to communicate and understand
  • Controllable
    • Majority of participants must be able to impact each element
    • Participants must have a high level of direct control over the elements
  • Measurable
    • Must have an objective systematic measure
    • Must be able to administer program at location level
  • Meaningful
    • Reasonable goals that ensure a strong participation rate
    • Targeted bonus amount must be motivational
    • Goals must be set prior to implementation
  • Sunset/Plan Changes
    • Must have start and end dates
    • Must be reviewed periodically and enhancements made as needed subject to executive and compensation approval


Incentives are intended to be self-funded and are intended to be consistent with the total compensation levels of the external labor market. Overall, we want to ensure fairness to employee, return on investment, effective motivational qualities and goal congruency between the system and the employees.