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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.
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
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
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
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
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
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
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
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
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
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
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
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
A common mistake is rewarding outcomes without considering behaviors. When bonuses focus only on results, culture suffers. The solution is balanced by tying incentives to both performance and values. Recognize not just what people achieve but how they achieve it. That is where lasting success begins. - Nicole Cable, Blue Zones Health