Designing an incentive compensation program that works
Laverty, S.; Hogan, B.J.; Lawrence, L.A.
Healthcare Financial Management Journal of the Healthcare Financial Management Association 52(1): 56-59
1998
ISSN/ISBN: 0735-0732 PMID: 10175108 Document Number: 490799
To encourage innovation and improve departmental and organizational bottom lines, Winchester Hospital, Winchester, Massachusetts, developed and implemented a middle management and staff incentive compensation plan. Middle managers and staff who participate in projects that provide savings to the hospital are paid a share of the savings. The plan allows staff the option of designing "horizontal" projects, in which a project leader carries out a project individually or with peers, or "vertical" projects, in which a project leader directs a team of key individuals. Increasing numbers of vertical projects have been proposed since the plan's inception in 1994. In addition to increasing the hospital's operating income, the program provides cost-effective, variable compensation, which especially appeals to motivated, high-performing employees; motivates employees to overcome roadblocks; facilitates a team approach that bridges traditional departmental boundaries; and encourages a beneficial and collegial competitiveness among managers.