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Linking incentives and rewards to performance

It is important that organisations link incentives and rewards to performance. If we fail to reward and recognize what we see as important then we quickly create a disconnect between company objectives and behaviours, as people focus on what is rewarded. However, if companies have created sound BPM systems, linked to their strategy and measured through meaningful KPIs, then they can use those to reward and recognize performance.

In an ideal world it’s all straight forward for businesses that want to provide incentives and bonuses to those who deliver outstanding performance. They simply define performance goals, measure the delivery of the goals and link incentives to the achievement of their performance metrics. So what could possibly go wrong?

Reading the front page of the Financial Times brought it all back. The FT reported how major banks are now reviewing the sales incentives they were providing to staff for selling products. The background here is that major banks had incentivised staff to sell payment protection insurance (PPI) to their loan customers. PPI is basically a cover that customers take out to cover their loan repayments in case they fall ill or lose their jobs. Because so many of these PPIs were miss-sold to customers banks are having to compensate them. The bill for miss-sold PPI now runs into billions of pounds.