Use a “pay for performance” plan?

A two-pronged goal-setting strategy may make sense for your team.

In this thought Leaders post, author Mike Figliuolo explains two distinct types of goals – commit and stretch – and the role each plays in driving exceptional performance (especially when money is a primary incentive). Here’s a quick summary of the main points he makes:

• When you set incentives, directly link the goal to the reward. Clearly define what employees will get if they attain certain levels of performance.
• Work with your employees to set two goal levels: “commit” and “stretch.”
• “Commit” level goals are ones employees need to deliver, no matter what. At this level, employees are just doing their jobs – and there should be zero bonus associated with hitting them. As a rule of thumb, “commit” goals are comparable to 70% effort.
• “Stretch” level goals are exactly what they sound like. Attaining them takes substantially more time and effort. So when employees hit them, they should receive 100% of their bonus.
• To maximize performance with this goal-setting model, create a sliding bonus scale that corresponds to the gap between the “commit” and “stretch” goal. For example, if an employee achieves a target halfway between his “commit” and “stretch” goal, he should receive 50% of his bonus.

Does this strategy mean your SMART goals are irrelevant?

Absolutely not. SMART (Specific, Measurable, Achievable, Realistic, Time-based) goals are still indispensable in helping your work teams stay on track. In fact, you can use the SMART goal-setting approach to define both “commit” and “stretch” goals. For more information, read our earlier post on setting SMART goals to drive growth in your business.

And no matter what type of goal-setting approach you use, keep the following tips in mind:

• Get everyone involved in goal-setting – from front-line employees through senior level executives.
• Communicate goals clearly. The better individuals and teams understand what they’re trying to achieve – and how their daily efforts impact goal attainment – the harder they’ll work.
• Revisit goals frequently. Meet monthly with personnel who are accountable for reaching your goals. If progress is on track, that’s great; but if progress is behind schedule, discuss the reasons and create a plan to get back on track.

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