Nonprofit Variable Pay

VARIABLE PAY PLAN MAINTENANCE

More variable pay plans fail because of inadequate maintenance than for any other reason.

Changing the plan has its hazards. However, by ignoring constant changes that occur in the organization, standards may become too loose, and the cost of the variable pay plan may become excessive without providing an incentive for extra effort.

In the beginning, careful attention to variable pay policies and procedures is a necessary prerequisite for the installation and successful administration of any variable pay plan. Wide participation in the development of these policies and procedures also increases the possibilities of success. A policy statement allows the organization to design specific plans in a way that keeps all plans consistent. Participation in policy making helps ensure the commitment of both management and employees.

There may be pressure to expand variable pay coverage to more employees in order to bring their earnings up to the level of those of variable pay plan employees. Ensuring that such expansion is economically justified is a major reason for a clear statement of policy regarding variable pay.

Supervision

Variable pay plans require good supervision. This requirement may mean selecting more capable supervisors, but it certainly means:

• training supervisors to understand the workings of variable pay
• showing supervisors that variable pay is an important means of obtaining the quality, cost, and outcome objectives that are their responsibility and the basis of their rewards

Unless supervisors acquire the necessary skills and a strong interest in making the plan work, the variable pay plan will quickly deteriorate.