By Tom Castley, Managing Director, Xactly EMEA

Incentives should be a positive tool, brought about by a desire to inspire performance and motivate a workforce towards a goal, in exchange for a reward. However in some cases incentives can have the opposite effect, encouraging bad behaviour and causing rifts in the workforce.

In his recent book, Game the Plan, Xactly’s founder and CEO Christopher Cabrera identified the top compensation plan mistakes to look out for, and in the first of two pieces on bad incentives we look at six of the most common mistakes to look out for:

1. Weak incentives – If the amount of effort or skill put into sales doesn’t match the pay-out, your most talented sales reps can become discouraged and look for employment that offers stronger incentives. When incentives fail to differentiate between high and low performers, you risk demotivating your best employees.

2. Unattainable goals – While setting stretch goals is a great way to motivate employees to move outside of their comfort zone, there is a fine line between pushing employees to reach their full potential and setting unattainable targets. When the bar is set so high that employees can’t come close to it, they become discouraged and give up.

3. Easy targets – On the flip side, goals that are too easy to meet are equally problematic. When the bar is set too low then employees will never be pushed to achieve their full potential, and they believe they are owed something just for turning up.

4. One-size-fits-all incentives – This approach to incentives will never be able to drive the desired behaviours of all the individuals and groups within an organisation. If you’re incentivising your Gen Y workers in the same way you are your Baby Boomers then you are not going to get the best results from either. Until you take into account their differences and identify their specific drivers, you’re motivating in the dark.

5. Lack of recognition – Xactly’s recent YouGov poll showed that non-financial rewards are proving increasingly popular – with recognition of achievements being the most popular reward. The key to tapping into this ‘recognition culture’ lies in finding a way to recognise and reward all employees in ways that are meaningful to them. Lack of recognition often translates to a lack of appreciation and no one believes their hard work should go unnoticed!

6. Capping commissions – Commissions should feel like a win-win situation for employees; the more money they make for your company, the more they get paid. But many companies cap commissions after a certain point, which may encourage employees to stop trying once they’ve reached a certain level – the reverse of how they should behave. Your employees shouldn’t have to pay the price for being good at what they do. If organisations are worried about paying too much to high-performers then perhaps the plan itself needs a rethink.

Part two in this series will reveal another six of the most common incentive plans mistakes which, left unresolved, will turn good intentions into bad, and damage employee engagement and retention.