which are examples of strategic control-and-reward systems

3 min read 10-03-2025

which are examples of strategic control-and-reward systems

Strategic control and reward systems are crucial for aligning individual and team efforts with an organization's overall goals. They provide a framework for monitoring progress, identifying deviations, and motivating employees to achieve desired outcomes. This article explores various examples of these systems and how they contribute to organizational success.

Types of Strategic Control and Reward Systems

Effective strategic control and reward systems encompass multiple facets, working in concert to drive performance. Here are some key examples:

1. Balanced Scorecard

The Balanced Scorecard is a popular strategic performance management tool. It moves beyond solely focusing on financial metrics. It incorporates perspectives like customer satisfaction, internal processes, and learning & growth. This holistic approach ensures a more comprehensive assessment of organizational performance. Rewards are then tied to improvements across all these areas.

Example: A hospital might use a balanced scorecard to track patient satisfaction scores (customer perspective), efficiency of hospital operations (internal processes), and employee training completion rates (learning & growth). Bonuses could be awarded based on improvements across all four perspectives.

2. Key Performance Indicators (KPIs)

KPIs are quantifiable metrics that track progress toward specific goals. They are vital for monitoring performance against strategic objectives. Rewards can be directly linked to the achievement of KPI targets.

Example: A sales team might have KPIs focused on revenue generation, customer acquisition cost, and average deal size. Commissions or bonuses could be tied to exceeding these targets. Similarly, a marketing team might have KPIs for website traffic, lead generation, and conversion rates, rewarding achievements accordingly.

3. Management by Objectives (MBO)

MBO is a goal-setting process where managers and their teams collaboratively define specific, measurable, achievable, relevant, and time-bound (SMART) objectives. Performance is evaluated based on the achievement of these objectives.

Example: A project manager and their team might set MBOs for project completion on time and within budget, with specific milestones for each phase. Performance reviews and rewards would be based on progress and successful completion of the defined objectives.

4. 360-Degree Feedback Systems

These systems gather performance feedback from multiple sources, including superiors, peers, subordinates, and even customers. This provides a comprehensive view of an employee's performance, going beyond a manager's perspective. Rewards can be based on the overall feedback received.

Example: A team leader might receive feedback on their leadership style, communication skills, and ability to motivate their team from team members, their manager, and even clients. Bonuses or promotions could be linked to positive feedback across all sources.

5. Profit Sharing and Gainsharing Plans

These reward systems directly link employee compensation to company profitability or productivity gains. They encourage teamwork and a focus on overall organizational success.

Example: A company might implement a profit-sharing plan where a portion of the company's profits is distributed among employees based on their contribution. This motivates employees to work towards increased profitability. Gainsharing focuses on improvements in productivity, efficiency, or quality.

6. Employee Stock Ownership Plans (ESOPs)

ESOPs grant employees ownership in the company, aligning their interests with the company's long-term success. This fosters a sense of ownership and encourages employees to contribute to the company's growth. Rewards are tied to the increased value of the company's stock.

Example: Employees receive company stock as part of their compensation. The value of their shares increases as the company prospers, directly rewarding them for the organization's overall success.

Designing Effective Systems

When designing strategic control and reward systems, consider the following:

Alignment with Strategic Goals: Ensure that the systems directly support the achievement of the organization's strategic objectives.
Fairness and Transparency: Systems should be perceived as fair and transparent to maintain employee morale and trust.
Measurable Outcomes: Use quantifiable metrics to track progress and evaluate performance.
Regular Feedback: Provide regular feedback to employees on their performance.
Flexibility and Adaptability: Be prepared to adjust the systems as needed to adapt to changing circumstances.

By implementing well-designed strategic control and reward systems, organizations can effectively align individual and team efforts with their strategic goals, driving performance and achieving sustainable success. Remember, the key is to create a system that's both motivating and fair, fostering a culture of accountability and high performance.