Copyright Forbes
It’s frustrating for company managers to invest in incentive programs only to find your team still acting like they’d rather clock in, do the minimum, then head home. So, if your bonus plan is ticking boxes but not energizing your team, don’t worry, you’re not alone. Many incentive programs may be at risk to fail, but not because the reward is weak. It's because critical pieces may be missing, like clarity, fairness and alignment with real motivation. Below, experts from the Forbes Human Resources Council each share common mistakes companies often make in their bonus or incentive programs, and how to avoid them. 1. Bonuses And Incentives Don't Align With Company Goals One key mistake organizations often make is not tying bonuses and incentives to organizational goals. Are you using a bonus to drive performance? Only 34% of organizations tie rewards to company performance. When you create a bonus or incentive program, consider the organization’s culture, workforce and objectives to find the right combination to motivate and reward employees. - Lexi Clarke, Payscale 2. Key Performance Indicators Are Overcomplicated Sometimes companies make the design of their bonus and incentive plans overly complicated by introducing too many metrics or KPIs. This can result in tedious calculations and confusion for employees. It is often more effective to have the plan(s) focus on three to five goals that align with the overall strategic direction of the company, both short-term and long-term. - Deanna Kempinski, Baker Tilly Vantagen 3. Goals Are Unrealistic And Prevent Employees From Achieving The most common mistake companies make while designing their bonus or incentive plans is setting vague or misaligned metrics that employees can't control, producing random payouts and distrust. One way to avoid it is to define measurable KPIs, set targets, thresholds and caps, and carefully weigh company, team and individual KPIs. Then, communicate clearly on metrics, weights, targets, payout formulas and timings. - Saman Effendi, HRSG Forbes Human Resources Council is an invitation-only organization for HR executives across all industries. Do I qualify? 4. Long-Term Strategy Is Not Fleshed Out Companies frequently make the error of concentrating only on short-term outcomes when implementing bonus or incentive programs, which can impede long-term growth and behavior. By creating incentive plans that are balanced and reward both short-term performance and long-term, sustainable objectives, this can be prevented while maintaining alignment with the company's overarching strategy. - Jawad Gilani, Packages Group 5. Employees Are Not Well Informed About Qualifying Prerequisites Not highlighting the "small" print or prereqs is a common mistake companies make when it comes to their bonus or incentive programs. An employee may then be disappointed or become disenchanted because they thought they were going to get a bonus, but since they did not meet the prerequisites, they will not be bonused. To avoid these types of opportunities, it is imperative to educate everyone. - Tish Hodge, The Shine Institute 6. Platform Is Not Accessible And User-Friendly When it comes to utilizing incentives, there’s power in choice. Workers can’t use what they can’t find, which is why it’s important to make incentives personalized and easily accessible. Embedding customizable incentives like HSAs, retirement resources and applicable gift cards into a user-friendly wellness platform skyrockets participation rates while containing program costs. - Neepa Patel, WellRight 7. Bonus Program Is Not Well Socialized Or Reassessed One common mistake is designing unclear bonus programs that are not well socialized or revisited if factors change throughout the year. Leaders set goals at the beginning of a performance year and then may not revisit or discuss them. Have performance discussions quarterly and reset goals and expectations as necessary so that your contributors have transparency and support in achieving their goals. - Nancy Folan, Element Coaching Group and HR Consulting 8. Employees Don't Make The Connection Between Daily Actions And Rewards A common mistake is defining performance too narrowly, creating unintended consequences by rewarding only certain specific behaviors. Incentive plans also fail when they are too complex or discretionary, where employees can’t see a clear link between daily actions and rewards. Keep plans simple, transparent and goal-aligned–or consider salary, promotion or equity instead. - Erika Andersson, Allshares 9. High And Low Performers Are Rewarded Equally A common mistake is giving the same bonus to both high and low performers. When exceptional effort isn’t recognized, motivation drops and top talent may leave. To avoid this, companies should differentiate rewards based on measurable performance, ensuring that incentives reflect contribution, drive engagement and retain high achievers. - Marcela Pizzi, Atlas Renewable Energy 10. The Program Is Nontransparent And Discriminatory Initially, it is essential to establish the aim of the bonus system to ascertain its alignment with corporate objectives and performance. Secondly, the criteria for bonuses must be transparent and free from discriminatory practices. If not properly established, the bonus system may result in staff dissatisfaction and demotivation, potentially leading to disputes rather than motivating staff. - Dr. Nara Ringrose, Cyclife Aquila Nuclear 11. Program Goals Conflict With The Shifting Market A frequent mistake is locking bonus programs to fixed goals in a rapidly shifting market or industry. When incentives can’t adapt to strategy, they lose value and organizational impact. HR can use agentic AI to monitor performance trends and adjust rewards in real time, ensuring bonuses stay relevant, data-driven and aligned with evolving business priorities without "moving the goalpost." - Dr. Timothy J. Giardino, myWorkforceAgents.ai 12. The 'One-Size-Fits-All' Approach Is Incompatible With Some Employees' Needs Companies often take a "one-size-fits-all" approach when it comes to bonuses and incentives. Not all employees are driven by cash rewards. Some may value time off, recognition or growth opportunities more. To avoid this, companies can offer flexible or tiered incentive options that reflect different motivators. Take an "all-sizes-for-all" approach. - Milos Eric, OysterLink 13. The Focus Is On Intentions Instead Of Real Outcomes I’ve set up bonus plans that sounded great but fell flat because they rewarded intentions, not real outcomes. People want to see a clear link between what they do and what they earn. Get specific, focus on the behaviors that matter most, keep the plan simple, and make the payout feel earned and understood. - Nancy Adams, CenTrak 14. Rewards Are Given Without Considering Behaviors
