The Individual Incentive;

 

Establishing incentives for individuals takes time, and many jobs are difficult to measure. But Michael Zisman, chairman and chief executive officer of Soft-Switch Inc., in King of Prussia, Pa., thinks that individual incentives are critical to the success of any compensation program. Last year, his company, an $8-million maker of computer networking software, embarked on a program that provides special rewards for about one-third of Soft-Switch's 70 employees.

The idea, says Zisman, was to encourage key employees to focus on individual objectives that are important to the overall success of the business. To provide the necessary rewards, Soft-Switch established a bonus pool based on its achievement of certain sales and profit targets. If the targets are met in fiscal 1987, for instance, the company will kick in 20% of the combined base salaries of affected employees. How that money gets divided depends partly on each individual's contribution to the company's collective success. Last year, for example, half of the potential bonus for the vice-president of operations was tied to such things as improving customer satisfaction ratings and reducing the time required to install products. (The other half was tied to the overall performance of the business.) Similar criteria are applied to many nonline positions as well. A large chunk of the controller's bonus, for instance, is linked to getting monthly reports in on time.

Zisman admits that it's not always easy to define the right objectives for jobs, but he argues that, without individual goals, some critical tasks will never become priorities. What's more, you'll always have a hard time differentiating between levels of performance, and everyone will wind up with roughly similar rewards.