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Performance Management Performance Management Cycle

Keys to Effective Group Incentive Programs

Group incentive programs are award programs that deliver lump–sum cash payments, time–off awards, and/or informal recognition items to groups of employees who meet or exceed pre–established levels of organizational performance. Designing effective group incentive programs can be key to achieving organizational goals.

Design Features

Group incentive programs can cover groups of employees as large as an entire agency or as small as a work unit or team. No matter how large or small the group, an incentive program should include the following design features:

Measurable Performance

Group incentive programs require reliable, accepted measures of performance. The program must express desired goals in terms of those measures. The measures can be quantitative or qualitative and are sometimes expressed in financial terms.

Specified Performance Period

Group incentive programs must select a time frame to measure the group's performance, for example, annually or quarterly. Effective incentive programs ensure clear communication with employees about program time-frames and expectations.

Threshold for Payments

Organizations should grant group incentives based on the goals established at the beginning of the performance period. Payouts are made at the end of the performance period each time a group meets or exceeds the established goal(s).

Payout Formulas.

Programs should have clear, understandable payout formulas. If the goal requires some kind of financial gain or savings, those savings usually are split between the agency and the employees. If the goal is to improve performance to a certain level, organizations should distribute funds specifically budgeted for the incentive program.

Employee Participation.

High involvement of employees and their representatives at all stages of program design and implementation increases the likelihood that they will understand and accept the program. Involving employees has the unique advantage of allowing them to understand the overall objectives of the organization as well as their specific role in meeting those objectives.

Agency Commitment.

Group incentives are powerful but time-consuming management tools. Organizations must commit to a high level of communication and participative management. The program's success depends on the level of upper-management support it receives.

Gainsharing and Goalsharing

In the Federal Government, agencies frequently use two forms of group incentive programs – gainsharing and goalsharing.

  • Gainsharing is a reward program that allows employees to share in an award based upon productivity gains or savings in excess of a predetermined baseline of performance. If an organization's goals include improving productivity, reducing waste, reducing costs, and/or creating a savings in production costs, a gainsharing program focuses employees on those goals. The most important difference between a gainsharing and a goalsharing program is that a gainsharing program is self-funding. Therefore, it requires reliable financial measures to calculate the “gains” (i.e., profits or savings) that the organization and employees will share.
  • Goalsharing is related to gainsharing but often is not financially driven. Instead of focusing on productivity gains, a goalsharing program establishes goals that support the organization's mission – goals such as improved customer satisfaction or improved program effectiveness. A goalsharing program distributes a payout to employees when the group meets or exceeds pre-established goals and usually is not self-funding. Many authors refer to a goal sharing program as a “family of measures” gainsharing program.
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