In a survey of more than 600 HR executives by the Hay Group and Loyola University, 62% reported that they do not attempt to measure their incentive plans’ ROI at all. About half of those that said they did measure ROI in some manner said their measuring is done informally through conversations with management. The other half said that they measure ROI formally by comparing the company’s investment in human performance with financial or productivity metrics or by assessing attitudinal data.

Many companies don’t take the time to measure the effectiveness of their incentive programs because the programs have been in place for a long time and are virtually running themselves. Others mention the problem of matching plans with results. Intangible goals like teamwork can be difficult to analyze financially. And other times it can be hard to isolate the effects of the incentive plan from other forces that affect company performance, like the economy or key management decisions.

Companies that can see the value of measuring the ROI of their incentive programs should find that they have all the tools they need for measurement right at hand. Incentives based on target completion dates or budget targets are easy to measure because avoiding delays and budget overruns can have a direct impact on the bottom line. Even plans that include intangible goals like improving teamwork or effecting cultural change can be measured if the ROI analysis is included from the first step of incentive design. In many cases, HR will need to partner with other departments to gain access to the necessary data that will help them obtain ROI.

Designing incentive plans with the ROI in mind helps to make sure that ROI is built into the plan. Ideally, the plan’s funding is based on achievement of the goals. In addition to achieving sales and performance goals, it is important not to lose sight of other potential gains like the plan’s impact on recruiting and retention or customer satisfaction.