While most Canadian companies consider their compensation plan effective, only a minority measure their effectiveness on organizational results.
According to a recent Conference Board of Canada study titled “Making Short-Term Incentives Work for Your Organization,” 83% of Canadian firms use such incentives to motivate employees to achieve organizational goals. The incentives include variable pay, performance bonuses and annual incentives. A second Conference Board study, ”Compensation Planning Outlook 2011,” highlights that 54% of companies consider their compensation plan as “effective” or “very effective,” while only 4% deem it to be “ineffective” or “very ineffective.” In 2011, companies plan to allocate 11.6% of their compensation budget to short-term incentives, on average, vs. 11.5% in 2010.
Few companies measure their plans’ effectiveness
However, the incentive study revealed that 69% of companies using these types of plans do not measure their effectiveness on organizational results. According to Associate Director Karla Thorpe, this is unfortunate: “Organizations need to do a better job of finding a link between pay plans and business results, to ensure they are getting value out of their incentive programs.”