Additionally, you should always make sure all of your teammates (co-stakeholders) are properly incentivized to work hard and get ahead. Contractors, business partners, industry partners, and the like should feel that they are in the same financial boat as you and each other; as a result, they will work better and harder for you and with you. So, if they perform at an outstanding level, and that makes your company evolve better and faster, then it makes sense for them to get extra pay.
In fact, you need your teammates to aspire to be high producers from the start, so encouraging them with financial incentives is often the most appropriate way to get the results that you require. There are many ways to motivate someone, but the bottom line is to always give deserving parties extra money for outstanding performance.
Often employees feel that they deserve extra pay, regardless of your interpretation of their performance level. While you believe their base pay is fair for the expected high level of work, they think they deserve more even before the incentive plan is slated to kick in.
Get used to it; everyone always thinks that more is needed. Explain your point of view so people understand what an incentive program is supposed to do for the company and the program recipients. If the program is vague or unrealistic, it will not serve its purpose.
The best choices for incentive-based programs include stock options, phantom stock options (which pay the same amount as real options but are easier to establish and have different management procedures), cash bonuses based on revenue, cash based on profit, cash based on sales volume, or cash based on hitting any other targets that you decide are reasonable.
One way or another, it’s important to encourage people to hit specific benchmarks by offering them rewards for doing so.
Of course, you always reserve the right to award additional, unexpected bonuses to employees who have performed above and beyond the ordinary call of duty.
Unless you keep and disclose a reliable record of what other incentive recipients have received in the past, your new incentive recipients might have a hard time understanding what it takes to hit their maximum reward.
Oftentimes, even you cannot be sure what the result of incentive plans will be, and you may accidentally pay the person more, or less, than you’ve anticipated.
Your best bet is to choose the most predictable type of incentive plan: one that truly maps the amount of benefit to be paid to performance level and more than what is expected in the normal course of business.
You want all the stakeholders to realize the same thing you realize: working harder, smarter, and more efficiently has financial benefits.