Incentive plans will not be successful if these are well thought out and carefully executed. The success of incentive schemes in an organisation will depend on certain prerequisites. They are stated below:
1. Management support and commitment: The success of incentive schemes depends on the total management support to the schemes and their commitment for its execution that needs policy and resource commitment.
2. Clear goals: Incentives are designed to achieve goals. Every person, managers and workers, all should have clear understanding about the purpose, mechanism, and execution mechanics of the incentive schemes to avoid any confusion in its calculation and administration.
3. Eligibility and coverage: The incentive plans shall have a clear description about who is eligible for incentives of different forms and under what conditions. Coverage of the incentives must be defined broadly enough to facilitate equity and team work but narrowly enough to include only those who affect the results. It will help overcome all future conflicts and contradictions.
4. Payout standards: The standards of performance eligible for getting incentives must also be clearly stated in quantitative and qualitative terms. Standards shall include what standard performance will be required to get incentives and when should the payout occur.
5. Administration of the scheme: How the incentive plans will be administered is a complex matter to deal with. The measures of standards, tracking of performance measures, calculations of incentives, clerical supports, cost-benefit analysis of the incentives, framing of incentive related rules and their observance, ensuring union support, and other administrative matters are to be looked into to ensure its smooth operation.
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