When you introduce incentive schemes make sure you design them to improve the performance of both individual employees and the business as a whole, not one at the expense of the other.
Incentive schemes that focus exclusively on improving individual performance can sometimes undermine teamwork and thereby overall productivity.
On the other hand, schemes that focus solely on improving firm-wide performance provide little incentive for above-average performers to go the extra mile. Not only does this deprive your business of their best efforts, it also increases the risk of your star employees feeling they are under-performing and therefore looking elsewhere for something more challenging.
To avoid this problem, consider offering an annual salary bonus to key employees who meet specific short-term goals, but with half the bonus awarded if the individual achieves his or her individual goals, and the other half if the firm as a whole meets its general goals.
Businesses that have tried this approach have reported improvements in productivity of up to 10%.
