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Workplace Engagement InsightsLatest Employee Engagement NewsUsing Employee Engagement Scores for Long Term and Short Term Incentive Compensation?

Using Employee Engagement Scores for Long Term and Short Term Incentive Compensation?


Many years ago, the 360 Review became a popular workplace tool for helping leaders learn more about how others see them and seek to make improvements in their leadership behaviors and style. However, some organizations began to use the output of the exercise in their performance reviews and compensation discussions. The upshot of all of that activity was to render the exercise mostly useless in those organizations, as leaders soon learned that they could game the system by being selective on which colleagues to get feedback from (indeed even going so far as making it a quid pro quo).

Subsequently, most enlightened HR executives and consultants strongly advised using the tool for developmental purposes only.

Employee EngagementToday I am hearing about employee engagement scores being used for both Long Term and Short Term Incentive Compensation (LTIP and STIP). I don’t have any firm evidence yet, but I fear that the same will happen in those companies that are using the tool this way – particularly if the scores for each leader are used for their incentive bonus calculations.

I would suggest that it is prudent to be extremely cautious in using data like employee engagement scores for anything but process improvements. Do use it to remove obstacles that frustrate employees, create new initiatives to improve the workplace, and for personal leadership development needs. If you want my opinion, don’t use it in compensation discussions! When we start putting money in the equation, we risk individual leaders trying to game the system by engaging their direct reports in the gaming of the results.

Employee engagement is a powerful tool for the corporate dashboard; it is a key predictor of the long term sustainability of a business. For that reason, the idea of using it for compensation calculations needs a lot more research and study to make sure it doesn’t backfire on the employer.

Want to engage employees? Measuring is the first step on the journey toward engagement and productive cultures. Schedule a complimentary consultation with us to discuss your specific organization’s needs.

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Written by Dwight Lacey

Dwight Lacey

Dwight is the President at Workplace Engagement Insights. He leads Workplace Engagement Insights with a clear understanding of the latest employee engagement research, survey best practices, and leadership styles that create successful businesses.

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