The first action to take when adopting an organization-wide variable pay plan is to:

Before implementing avariable pay plan, the most critical strategic step is determining if the plan willachieve the intended result— that is,improve employee and organizational performance. All other decisions (like goal-setting or benchmarking) are secondary to establishingjustificationfor the program.

Extract from HRCI-aligned HR knowledge (Total Rewards andLeadership and Strategydomains):

SPHR requires HR to “evaluate compensation initiatives for alignment with strategic goals and performance improvement.” The decision to implement variable pay must begin with acost-benefit and impact analysis, verifying thatperformance incentives lead to measurable productivity or behavioral outcomes.