INCENTIVESRECOGNITION

Incentives and RecognitionWhat’s It Cost To Improve Performance?

In general, the three elements of incentive program budgeting include number of participants, length of program and expected results. There are two types of award budgets – closed-ended, and open-ended. You must determine the maximum costs involved with a closed-ended program and an estimate of costs involved for an open-ended program.

In a sales incentive program, the primary rules are:

  • Anywhere from 5 to 10 percent of additional (incremental) gross sales during the incentive period can be applied to the total cost of the program

  • The cost of the rewards should equal 5 percent of all compensation for the program period

In a non-sales program, it’s more difficult to put a monetary figure on the value of “improvement,” but some measurements are possible that involve increased productivity, improved attendance and improved safety. The budget can be determined by the “value” the company will realize from improvements resulting from the incentive program.

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See also in:  Incentives & Recognition

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Remember The Three C’s: Create Corporate Culture

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