Make sure incentives are clear. Employees' understanding of a performance package leads to their being incented by that package. More than any other feature of the package, comprehension is vital. In fact, not understanding the package can lead to apathy or even distrust.

Be sure the package provides something employees care about. Cash is not always king; sometimes security for the employee and his or her family is considered more important. The employee wants to know these things: "If I die, will my family be taken care of? If I become disabled, will my income continue? When I retire, will I have enough money?" To the extent the employer can respond to these questions with such tangible solutions as coverage for life and disability, employees are able to focus on the job at hand, not on financial concerns.

Monetize and insure the pay package. Especially in smaller enterprises, it's important for key employees to know the company has moved beyond mere promises. For example, if a major part of the executive's retirement package is in form of a deferred compensation plan, the employer should bolster the promise of life insurance and mutual-fund financing. A rabbi trust could be included to assure the employee that future management won't "steal the funds."

The employee should have "skin in the game." Not all forms of incentive pay require employee participation, but it can be an effective way to assure employee buy-in. Three examples:

With an employer-provided deferred compensation, include the ability for the employee to defer some of his or her own pay as well.
With a stock option plan, keep in mind the plan doesn't necessarily need to be cashless. The employee's need to secure financing for the stock purchase may help him or her realize the value of the options.
With a life insurance-funded executive bonus plan, allow the employee to add additional dollars to the policy. The employer could pay enough premium to assure that the policy won't lapse and allow the employee to contribute excess premiums that will generate additional tax-deferred cash values.

Avoid making the incentive an entitlement. For any enterprise, business rarely stays the same. So why should incentive packages remain constant? By occasionally refreshing incentive packages and obtaining management input and buy-in, a new plan can truly become understood and appreciated.

Sell the plan. It's not uncommon for employers to spend more time crafting an incentive plan than employees spend learning about the plan. Key employees are busy people and often need to be spoon-fed information. Charts, summaries and meetings are all important tools for assuring employees both understand and are motivated by what is being offered. Employers should sell the "hidden paycheck" they provide, emphasize the "golden handcuff" that is part of the incentive, and "brag up" the potential payday for a job well done.

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