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Related Experiment Videos

Designing an incentive compensation program that works.

S Laverty1, B J Hogan, L A Lawrence

  • 1Winchester Hospital, MA, USA.

Healthcare Financial Management : Journal of the Healthcare Financial Management Association
|December 8, 1997
PubMed
Summary

Winchester Hospital implemented an incentive compensation plan rewarding staff for cost-saving projects. This initiative encourages innovation and improves financial performance by motivating employees and fostering collaboration.

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Area of Science:

  • Healthcare Management
  • Organizational Behavior
  • Health Economics

Background:

  • Hospitals face pressure to improve financial performance and foster innovation.
  • Traditional compensation models may not adequately incentivize cost-saving initiatives or cross-departmental collaboration.

Purpose of the Study:

  • To describe the development and implementation of an incentive compensation plan at Winchester Hospital.
  • To evaluate the impact of the plan on innovation, cost savings, and employee motivation.

Main Methods:

  • Implementation of a compensation plan rewarding middle managers and staff with a share of savings from their projects.
  • Offering options for "horizontal" (individual/peer-led) and "vertical" (team-led) projects.
  • Tracking the number and types of projects proposed since the plan's inception in 1994.

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Main Results:

  • The plan has led to an increase in proposed vertical projects.
  • The program contributes to increased hospital operating income.
  • The plan offers cost-effective, variable compensation appealing to high-performing employees.

Conclusions:

  • Incentive compensation plans can effectively encourage innovation and cost savings in hospital settings.
  • Such programs can motivate employees, facilitate teamwork across departments, and promote healthy competition.
  • The Winchester Hospital model demonstrates a successful approach to aligning employee incentives with organizational financial goals.