The StrategicPay Blog would like to thank fellow Compensation Cafe blogger Darcy Dees, for her contribution of this excellent posts on incentive plans.  Thank you Darcy!

Jim Collins wrote a book entitled Good to Great that discusses the importance of having the right people in the right jobs at your company in order to be successful.
From Jim Collins's website: This book addresses a single question: Can a good company become a great company, and if so, how? Based on a five year research project comparing teams that made a leap to those that did not, Good to Great shows that greatness is not primarily a function of circumstance; but largely a matter of conscious choice and discipline. This book discusses concepts like Level 5 Leadership, First Who (first get the right people on the bus, then figure out where to drive it), and the Flywheel.

I buy into that concept, but I've never really liked his analogy of having the right people in the right seats on the bus.  Unless you're a character in Speed, bus passengers are passive participants in the bus ride; only the bus driver can make the bus go in a particular direction.  So this comparison leaves a bit to be desired because it would indicate that only one person has an impact on where the company goes.  You may ask:  What difference does the analogy make if the underlying theory is sound?  I believe that inappropriate correlations can cause skewed thinking and result in skewed decision-making.  I sometimes wonder if this analogy has been used to justify some of the excessive executive compensation packages we've seen.  If you believe only the bus driver matters, you're going to pay that driver really well.

I've always preferred the analogy of a rowing crew.  You place people in the seat that utilizes their individual strengths and everyone works together to achieve a common goal.  You must row in concert and in the same direction in order to get where you need to be.  You won't do as well if you have weakness in any seat, but there are particular seats that need a stronger performer than others.  So in business parlance, you can get by with "B" players in certain seats, as long as you have "A" players in the most important seats.

From the perspective of the rowing crew analogy, I think this is why more and more businesses have extended participation in cash incentive plans deeper into the ranks.  (Well this and the fact that it decreases the pressure on the fixed cost of base pay).  An incentive plan can make sure everyone on the "boat" understands where they're trying to get to and how to get there.  Incentives are sometimes overused and misused, which is why Dan Pink is selling so many books.  It doesn't do any good to tell someone lying at the bottom of the boat without an oar to take us someplace, line-of-sight is imperative.  But an incentive can be a powerful tool for motivating your team who are holding oars and reaching an agreed upon destination.

Incentive plans, just like analogies, usually aren't perfect.  But they both continue to be used because they can help achieve goals and improve understanding.  It is important to continually review to make sure that they are working as designed and aren't doing more harm than good.

Darcy Dees, CCP works as the Compensation Manager for Rock Bottom Restaurants, Inc., headquartered in Louisville, CO.  She has worked with RBR for nearly 10 years helping to develop many of the compensation and performance management programs the company uses today.  She spends what little free time she has hiking and reading.
The opinions expressed here are the personal opinions of Darcy Dees. Content published here is not monitored or approved by Rock Bottom Restaurants, Inc. before it is posted and does not necessarily represent the views and opinions of Rock Bottom Restaurants, Inc.

Image:  Creative Commons Photo "Tufts, Head of the Charles" by crschmdit