Employee Incentive Programs in an Era of Change
- November 10, 2020
Making decisions regarding physician, employee, and executive compensation thus far in 2020 has been difficult. With most healthcare delivery organizations’ volumes depressed due to the COVID-19 pandemic and financial performance significantly impacted in Q2 and Q3 (and potentially beyond), virtually every organization has had to make difficult decisions on how best to continue to compensate their workforce. (In many instances, this has transcended to continued employment considerations.)
Interestingly, based on a recent survey, only 16% of hospitals will eliminate executive bonuses for this year. And many organizations are providing one-time bonuses to their employees during this tumultuous time. For example, Trinity Health (located in Minot, North Dakota) recently announced they are providing bonuses ranging from $250 to $500 per employee. Trinity Health President and CEO John Kutch says it is for workers who have been “making more possible” during this challenging time. Thus, all indications are that organizations are attempting to protect their employee’s continued employment and protect compensation for their constituents, even during these challenging times.
As organizations begin to consider how to address compensation in the long-term, the question of employee incentive plans has naturally arisen. We answer several pertinent questions leaders within rural facilities are contemplating concerning employee incentive programs.
If we have an employee incentive program currently in place, should we continue to fund it?
As the most often question currently asked, our consistent response is, “if you can afford to do so, you should.” Healthcare employees are being tasked with difficult and different types of clinical care, intense patient needs, and exposure to potential risks to which they are unaccustomed and, in some cases, unprepared. If your organization can fund employee incentive programs based on your organization’s current financial position, we recommend doing so.
Conversely, suppose your organization’s financial picture is too perilous. In that case, provide clear communication about the lack of funding and the anticipated duration of the freeze on incentive payments (e.g., this quarter, this year, for the foreseeable future). Particularly in rural communities, citizens view the hospital as the principal employer and want it to survive. However, for many, it is their primary income source to provide for their families. Thus, not receiving an expected bonus may be a difficult reality.
On the other hand, some organizations have to choose between keeping people employed and paying out their incentives, and in that case, maintaining jobs is preferred. Thus, the decision to continue funding employee incentive programs is difficult, and we support such wherever financially feasible (although not having to eliminate positions is more important).
If we do not currently have an incentive program in place, should we pursue one?
Timing is everything, and many organizations are considering if “now” is the right time to progress their employee incentive program plans. The short answer is yes, now is the right time. It may not be the right time to unveil or fund the program, but to begin planning for (or continue work on) an incentive program is wise.
First, it gives employees optimism; this year has been challenging with poor financial performance, furloughs, lay-offs, and peers getting sick (among other challenges). Open discussion around the development of an employee incentive program can serve as a beacon of hope. Second, as rural health organizations determine the changes needed to protect and bolster their organization in the future, an employee incentive plan that raises awareness of new goals and aligns incentives is perfectly timed.
If we decide to develop an employee incentive program, what is its best structure?
The best plans have incentives for individual, department, and enterprise-wide performance. However, the proportion of the incentive tied to each category varies with the organization’s goals. For example, it is common to initiate an employee incentive program with a narrow set of enterprise-wide goals and then expand the program to the individual and department level. Ultimately, the enterprise, department, and individual levels are all considered.
First, consider targeting up to three enterprise-wide goals as the totality of your program for Year One. Later, expand the program as the stakeholders can better provide their input on departmental goals; be sure to validate accessible and accurate data for those future goals before you implement them.
What are the common pitfalls in employee incentive programs?
Unclear standards and metrics are still the most prevalent issues in employee incentive programs. A rural healthcare provider may develop a program, but the front-line worker does not understand how their performance impacts achieving it. Thus, the goal of behavior and morale improvement is never realized.
Use all available communication methods (e.g., emails, intranet, departmental meetings, town hall meetings) to discuss the plan’s structure, implementation, and incentive plan goals. Ensure the messaging is consistent across all mediums and frequently articulated, so all are aware of the collective goals the organization seeks to achieve. While our world is suddenly different today, it is still possible to reward desirable behaviors that align with financial realities.
To learn more about how Coker Group can help develop or redesign your employee incentive plan, contact us, and request to speak with Aimee Greeter or Max Reiboldt.
Max Reiboldt, CPA