Clarify the purpose of the scheme. Do you want to attract and retain key employees or drive performance improvements in a specific area?
Decide which employees should take part: for example, employees who are difficult to recruit, or the sales team. Ensure that the scheme does not discriminate unfairly.
Decide how long the scheme should run: a permanent scheme to improve recruitment for instance, or a six-month sales drive.
Decide the most appropriate form of incentive: consider commissions, bonuses, performance-related pay increases and share options.
Decide what scale of incentive you need to offer to make an impact; consider whether short-term, smaller incentives will be more effective.
For shares or options, investigate whether any tax-effective schemes meet your requirements and justify the administrative burden involved.
Decide how performance will be measured; aim for clear, quantitative targets related to your objectives, rather than subjective assessments.
Think through any possible adverse effects — such as employees ignoring tasks which do not count towards targets — or loopholes that might allow employees to work the system.
Review whether your scheme will deliver the results you hope for; confirm that the benefits of achieving your targets will justify the cost.
Explain the scheme to your employees, and encourage comments and suggestions; ensure that they agree that the scheme is fair.
Negotiate and agree realistic targets or performance standards.
Be prepared for negative reactions from employees who are excluded.
Once the scheme has been introduced, monitor its effectiveness; be prepared to make changes if it is no longer delivering results.
