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Performance Based Pay

3PLE-WIN – the WOLF approach

Performance Based Pay with the Target Improvement System

Performance Based Pay with the Target Improvement System


(wg) Specific characteristics of German law exacerbate the introduction of performance based pay systems and incentive plans. The Target Improvement System (German: Zieloptimierung) brings commitment, supports implementation and simplifies rollout.

The Target Improvement System is the triple incentive for best and highest possible results:

  1. when agreeing on the objectives and measures for the Concrete Action Plans (CAP)
  2. when implementing the measures for the Concrete Action Plans (CAP)
  3. when achieving the objectives

When agreeing on the objectives the Target Improvement System motivates the receiver of the performance based pay to select the highest possible objective achievement levels and to take the initiative and develop the best possible and economic measures for achievement of the set goals. When implementing the measures for the Concrete Action Plans (CAP) the Target Improvement System motivates the receiver of the performance based pay to implement the best possible solutions. When achieving objectives the Target Improvement System motivates the receiver of the performance based pay to achieve the highest possible results.

The roots of performance based pay

Win-Win´s historical background

Thousands of years old: commission. The performance based pay idea is already that old. It was created by Chinese merchants as a business-commission model (“one tenth of sales volume”. Indeed, fixed or time-oriented personnel costs did not exist as a concept at that time.

Today: Increased efficiency. By involving employees in success, you motivate them to achieve better performance. However, due to the social safeguarding through fixed salaries, this is possible only when the agreed upon work-contractual achievement point is exceeded.

incentive performance based pay

Target Improvement System decreases the Break Even

3PLE-WIN – the WOLF approach

Tomorrow: Target Improvement System. Only when the parties involved and, if necessary, the workers´ council agree with and support your performance based pay system, can the door be opened for further benefits for both sides.

Success-oriented: Target Improvement System. Through converting fixed salary parts into variable ones, the profit scissors are opened much earlier. Employees can receive a share of the company´s success much earlier and thus receive a better stimulus to contribute to this success, knowing that they can improve their income level with their own actions.

Target Improvement System incentive performance based pay

Target Improvement System

The Unique Incentive System

Unique Selling Point of the Target Improvement System: triple incentive for best and highest possible results

  1. when agreeing on the objectives and measures for the Concrete Action Plans (CAP)
  2. when implementing the measures for the Concrete Action Plans (CAP)
  3. when achieving the objectives

1. When agreeing on the objectives and measures for the Concrete Action Plans (CAP)

  • Target Improvement System motivates the receiver of the performance based pay to select the highest possible goal-achievement levels (goal-achievement level=the target specifications of the measures)
  • Target Improvement System motivates the receiver of the performance based pay to take the initiative and develop the best possible and economic measures for achievement of the set goals and to coordinate these with his managers

2. When implementing the measures for the Concrete Action Plans (CAP)

  • Target Improvement System motivates the receiver of the performance based pay to implement the best possible solutions.

3. When achieving objectives

  • Target Improvement System motivates the receiver of the performance based pay to achieve the highest possible results.

Incentive pay, performance based pay, bonus, pay for performance, commission…

All of these terms and any other possible forms of performance based pay are included in the term “performance based pay” when it is used here. This is made possible by the fact that the Target Improvement System is equally suitable for:

  • all branches of trade,
  • all levels,
  • all functional areas,
  • all target groups,
  • and all known incentive pay forms.

Following you can find an extensive overview of all the benefits and advantages associated with this unique model. You will find some effects that can be achieved through other performance based pay models or at least can be aspired to. However: Do you know of such an performance based pay system, which can also 100% accomplish all the advantages it promises?

1. Incentives during the agreement on objectives and measures

Target Improvement System motivates the receiver of the performance based pay to select the highest possible goal-achievement levels (goal-achievement level = the target specifications of the measures)
Target Improvement System motivates the receiver of the performance based pay to take the initiative and develop the best possible and most economical measures for achievement of the set goals and to coordinate these with his/her managers.

More advantageous motivating effects include:

  • Employees are motivated to determine and establish challenging goal-achievement levels in accordance with management´s requirements.
  • Employees and managers are going to agree only upon realistic, achievable objectives.
  • Goals, goal-achievement level and concrete action plans (CAPs) will be determined by the employee and management and reported bottom-up.
  • The goal direction is given by the company´s top management, distributed top-down and, in accordance with the company´s strategy, broken down to the various divisions, depending on the different tasks and functions.
  • Target Improvement System ensures the coverage of the goal-achievement level: the implementation and the aspired benefits from the measures are to be planned concretely in light of the available resources. Target Improvement System provides all the persons involved with a very high degree of economic viability and security.
  • Measures from other functional areas, which influence the measurement categories positively or negatively, are identified by the employees. This results in a timely coordination of objectives, overlapping of CAPs between different departments and a mutual support at the creation and optimization of these measures.
  • Goal achievement boundaries are set, which ensure that the outcomes of external factors which cannot be influenced by the employees are not taken into consideration for the calculation of the bonus.
  • External factors that can at least to a certain extent be influenced by the employees (and these are not a few) will be used by the employees in favor of the company.
  • Qualitative and/or quantitative objective direction can be predetermined and combined with the highest possible goal-achievement levels.
  • Efficiency and/or success measurement tools can be integrated in the system and combined with the highest possible goal-achievement levels.
  • Individual and/or team-oriented and company or, respectively, unit-specific measure values can be integrated in the system and combined with the highest possible goal-achievement levels.
  • The receivers of variable remuneration develop the best possible and most economical measures for achievement of the set goals and submit these to his/her managers.
  • Management can quickly organize the company strategically.
  • Top managers experience a strong relief during the goal-setting process.
  • Employees receiving variable remuneration experience higher appreciation and encouragement.

Triple Win:

  • Management can quickly organise the company strategically.
  • Top managers experience a strong relief during the goal-setting process.
  • Employees receiving variable remuneration experience higher appreciation and encouragement.

2. Incentives during the implementation of the Concrete Action Plans (CAP) measures

Target Improvement System motivates the employees receiving performance based pay to implement only the best possible solutions.

More advantageous motivating effects include:

  • Whether the desired objective is still remote or already achieved – the Target Improvement System motivates the employees during every step of the process.
  • Employees will effectively implement the measures necessary for the achievement of objectives.
  • Should circumstances change (chances, risks), the necessary measures for such cases will be taken, as agreed on with management, so that the planned objectives can still be achieved.
  • Target Improvement System thus strongly motivates the employees to achieve a high degree of information flow and greater clarity regarding roles, responsibilities and strategic objectives.
  • Should the measures that have been planned not bring the desired results, time will not be spent to look for the “guilty one” or to blame the “circumstances”. With Target Improvement System the employees are strongly motivated to find other ways, and come up with new measures instead, in order to achieve the desired results despite any problems or inefficiencies.
  • Target Improvement System thus boosts the fighting spirit, innovativeness, audacity, the ability to solve problems, creativity and activity.
  • Measures, that are agreed on and intertwined with other divisions, will be implemented with comprehensive assistance, covering all divisions.
  • The “all for one” implementation of the individual measures encourages the employee´s identification with the company, the networking, the reduction of absence time, better bonding among colleagues, and a better understanding about organizational roles and responsibilities.
  • Taking responsibility with regard to consistency of the individually planned and individually achieved success for each measure encourages the employee´s responsibility and self-improvement.
  • Employees will not require help from managers (insufficient motivation and reduction of the objectives planned for the period) but will try to find this help themselves from different sources.
  • Management achieves a reliable basis for the corporate policy decisions through the qualitative process control.
  • Top managers receive great support and relief during the process of measures implementation.
  • Employees receiving variable remuneration enjoy work more when implementing the measures created by themselves, and when identifying the success achieved on their part.

Triple Win:

  • Management achieves a reliable basis for the corporate policy decisions through the qualitative process control.
  • Top managers receive great support and relief during the process of measures implementation.
  • Employees receiving variable remuneration enjoy work more when implementing the measures created by themselves, and when identifying the success achieved on their part.

Target Improvement System 3PLE-WIN: Giving incentives during the achievement of objectives

Target Improvement System motivates the receiver of the performance based pay to achieve the highest possible results.

More advantageous motivating effects include:

  • Affordability of the performance based pay will be ensured via the Target Improvement System combination of individual, divisional, and company objectives and measures.
  • Specific definitions, given in advance, make the degree of goal-achievement clear and understandable for all parties involved.
  • The achievement of highly-set objectives causes a constant flow of result-oriented improvements in structures and processes.
  • The high degree of acceptance of Target Improvement causes a continuous improvement of the entire Compensation Benefits Systems.
  • The Target Improvement System provides a strong incentive to document the implemented measures, so that they can be improved further and others could also profit from them.
  • The theoretical anchoring of the Target Improvement System stimulates the employees receiving variable remuneration to choose a salary structure with a bigger variable payment part.
  • The Target Improvement System gives the employees an incentive to choose payout forms that are free of charge or very cost-efficient.
  • The Target Improvement System gives the employees incentive to improve themselves, and to improve their professional, methodical and social-competence knowledge.
  • Receivers will be more interested than ever in business issues in and around the company, for operational and professional subjects, and for company metrics.
  • Target Improvement System can offer motivation during the implementation, application and continuation of:
    • Quality concepts such as EFQM or Six Sigma
    • Goals and measures systems
    • Time value systems such as time value accounts, flexible working hours, lifetime work models, old-age part-time models, pension schemes, direct insurance
    • Management systems such as 360° feedback, identification of potential, succession planning, career planning, and retention programs, etc.
    • Audit systems in order to omit risks, redundancies, weak points, etc.
    • Idea, knowledge and document management and the employee suggestion scheme.

Triple Win:

  • WIN: Management can achieve results exactly as planned and is seen as a reliable partner working for the increase of the company´s value by the shareholders.
  • WIN: Top managers receive great support because even their own remuneration-relevant objectives are achieved with the help and contribution of the employees.
  • WIN: Employees receiving variable remuneration are proud of the CAPs implemented, of the success achieved, and are happy to receive recognition for their efforts.

WOLF

The Target Improvement System experts

A few examples of where and how we can offer you support.

  • Workshops analyzing the IS and SHOULD situations
  • Producing reasonable sets of measures
  • Creating concepts and project sequence plans
  • Facilitating information exchange with the top decision-makers
  • Creating company visions and strategies
  • Developing corporate culture, guidelines and values
  • Establishing a firm-specific objectives and measures system
  • Aligning with further desired or existing management tools
  • Constructing intelligent remuneration systems
  • Supporting the launch and implementation processes
  • Providing efficiency calculations
  • Ensuring the effectiveness of the strategic direction, value added, acceptance, affordability, comparability, agreement, legitimacy, transferring in practice…
  • Developing performance and success measures for individual and mutual objectives
  • Demonstrating cases and showing different ways and solutions
  • Integrating “tricky” areas, qualitative and quantitative objectives, combinations, related objectives, weightings, different actual conditions, various functions, etc. in a highly motivating performance based pay system. (Key points are: degree of growth, change of bonus when there is precision of objectives, under and over achievement of goals)
  • HR Department training for a simplified and less expensive handling and controlling of the company-specific Target Improvement System.
  • Training for the implementation of Target Improvement System as a management tool for top management
  • Support and coaching during the implementation for all the people involved
  • Providing information to employees, thus ensuring the acceptance of Target Improvement System
  • Creating works council agreement, documentation, calculations, drafts for both management and the work council, training manuals, forms, etc.
  • Special IT program for the creation of Target Improvement System bonus calculation tables
  • Providing motivation for the initial division through image-oriented binding
  • Continuous optimization and strategic update of the Target Improvement System

Increasing corporate performance and human capital

We offer solutions that help you, together with your executive managers and employees, to establish an performance based pay system that will help you to manage your costs, increase your earnings, and improve the market position of your company.

Alleviating top managers – encouraging the strengths of the employees.

The profound economic, social and technical changes have created consequences for company structures and the company´s employees. Companies, who want to be and stay on top, see the changes as a chance to revise structures. Those who are not flexible enough will be bent and broken by these changes. Because only change is constant and it is approaching with an increasing strength and speed.

The people working in a company are just as important as the suitable structures and efficient processes are. Managers and employees who are committed to change are needed, people who are flexible and qualified to fill in structural flexibilities. Flexible structures challenge employees and it is our task to encourage this process. It is essential to give our employees a direction and the tools and knowledge necessary to follow this direction. However, if we want to sustain our differentiation from the competition, we have to offer strategy-implementing incentives.

  • Personal competence
  • Leadership competence
  • Social competence
  • Specialist methodical competence
  • Motivation
  • Orientation
  • Sustainability
  • Realization

WOLF was created in the 80´s. The Incentive Pay Systems business segment plays an important role for the WOLF unit. We are the performance based pay system specialists.

From our extensive consulting services you can expect competence, commitment and empathy during the analysis process, as well as dedicated implementation. Taking into account the requirements of all parties concerned, the vision and the corporate culture of the company, we offer you a partnership. In this we will create concepts customized to your company together with you and will assist you during the result-oriented implementation of these concepts.

Develop the Human Resources of your companies together with us that will meet current and future requirements and are in line with the strategic direction of the company´s objectives.

We offer you company-specific solutions for the conception, design and implementation of your performance based pay system. These are tailored to the specific requirements you want to meet, and to the values and objectives which are of highest priority for you. Project and process-referred, we concentrate on the objectives, strategies and central issues in your company. We work result-oriented and our actions are clearly defined and easily controllable for you.

If you would like to get more information about highly-efficient performance based pay systems, compensation and benefits from one of our consultants, please do not hesitate to contact us.

WOLF Management Consulting | Summary
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Name
Performance Based Pay
Designation
The Target Improvement System

WOLF Management Consulting, based in the heart of Germany, is a highly professional business services provider. We are experts in the fields of management consultancy, seminars, training, facilitation, coaching, interim management, events, presentations and media publication.