10 ways to make incentives work

Human Resources

by Felix Soriano

“I don’t believe in giving a bonus or incentive pay to my employees.” “I tried it once and it didn’t work.” ”They’re getting paid to milk cows, why should I pay more for them to try harder?”

These are comments I hear from some dairy producers when I suggest implementing incentive programs for employees. The reality is that, when designed and executed properly, and done at the right time, bonus programs do work. Incentives will increase performance and drive productivity, improving efficiency and the bottomline profitability.

Here is my “Top 10” list of tips to help you get the most out of any incentive plan:

1) Don’t implement any bonus program until performance is at your standard expectations. Don’t use incentives to correct problems or poor performance. Use incentives to achieve goals and improve productivity, efficiency and profitability.

2) Keep it simple. Bonus structures must be simple and easy to understand by workers.

3) Use few performance parameters. Develop the bonus program based on one or two parameters; three at the most. When working with milkers, focus only on SCC, parlor throughput and milk flow in the first minute.

4) Keep track of performance daily. Post the performance numbers for employees to see. Payout can be weekly or monthly, but feedback should be daily.

5) Give employees the tools and support they need. Don’t set up unrealistic goals and expectations. Do employees have all the tools to achieve them? Employees can get frustrated if the bonus is impossible to achieve because the milking units are not working properly, or the mixer isn’t properly maintained.

6) The bonus plan should be flexible. As goals are accomplished, increase your expectations. Some parameters may also change based on the time of the year.

7) Set bonus eligibility conditions. Set up rules and conditions to prevent workers from breaking rules to get the incentive pay. For example, when implementing a bonus program for calf care workers based on number of calves weaned, establish a baseline or budget for use of feed and medicine. Develop feeding and treatment SOPs to ensure things are done properly and at the right time.

8) Workers should be properly trained. Before implementing any bonus structure, employees must understand the importance of their job, their role in achieving the goals, and why, how, when and what they are supposed to do to achieve excellent performance and productivity.

9) Communicate and explain the bonus structure. Review the plan with your key employees or supervisors before meeting with the rest of the team. Get their feedback, then hold an employee meeting to explain the bonus structure, seeking feedback and opinions.

10) Separate incentive pay from regular pay. Issue separate bonus checks or pay in cash, giving it out on a different day than their paycheck. Pay incentives on time.

Also, share the incentive program with your veterinarian, nutritionist and/or consultant, and get them involved in the program.

Remember, when done right bonus programs can be an effective way of rewarding individual employees or teams for excellence.


Felix Soriano is a labor management and human resource consultant with APN Consulting LLC, Warrington, Pa. Contact him via phone: 215-738-9130, e-mail: felix@apndairy.com or visit www.apndairy.com.

One Comment on “10 ways to make incentives work”

  • Incentive Programs June 29th, 2010 2:29 pm

    Some great tips here – I especially agree with only recognizing and rewarding performance that is “above and beyond” accepted standards. Also, to create motivation, not only must goals be realistic but the rewards offered by the program need to present a compelling value proposition to the worker – the reward needs to have enough value to justify the extra effort needed to earn it. And don’t forget to combine an employee recognition / social element with the rewards.