Getting More from Your Employees:
Incentive Program Benefits, How-To's, Caveats

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Give your employees a sense of purpose. Inspire them with a vision. Empower them with authority to accomplish their responsibilities. Compensate them fairly and communicate appreciation. These keys are the essential elements of employee motivation. But there are times when you want your team to give even more.

When your goals are ambitious and you need to encourage your team to give more than their normal effort, incentive programs may be the ticket. Travel, gifts and prizes, cash, recognition and awards, stock, and more are all examples of employee motivation programs, incentive programs.

Such motivation and incentive programs have been around for decades. But times are changing. In the past, incentives for longevity may have rewarded 5, 10, or 20-year employees with a standard schedule of gifts or bonuses. These days, though, with ever-shortening career cycles, it may not be practical to establish such a long-term reward program. If your employees see the goal as unattainable, the promise of some far-off future reward has little impact.

More frequently today, incentive programs are used to achieve shorter term objectives: meeting a tough sales quota in a highly-competitive marketplace, meeting a government-mandated safety standard, or speeding up process workflow in order to keep up with increased costs and still turn a profit.

Do Incentive Programs Really Work?

Sony, TJ Maxx, See's Candies and other companies see the value in providing their products as incentives. So much so that these three represent a growing tidal wave of companies who have specific departments which design incentive programs around their products. This alone is a strong indication of the confidence major corporations have in the practice. But what about empirical research?

According to a white paper published by the Aberdeen Group Inc., companies with superior employee relations programs, including incentive programs, grew more rapidly than their competitors by a factor of four over the timeframe between 1986 and 1995.

Industry expert Christopher Faust, of Softscape, advises integrating incentive and recognition programs with employee performance reviews. This, he says, creates a tremendously motivating experience that draws a line for employees between their performance, the feedback they receive, and the rewards they earn.

HR professionals responding to The Society for Human Resource Management's 2005 Reward Programs and Incentive Compensation Survey points out these key facts:

  • Over one-third of HR professionals say their organizations offer an “employee of the month” or similar recognition.
  • 34% of HR professionals indicate their organizations offer non-cash, companywide performance rewards.
  • Non-cash companywide performance awards are given most frequently to non-management salaried employees, non-management hourly employees, directors/managers and upper management (in this order).
  • 29% of HR professionals say their organizations offer safety achievement rewards.
  • Non-monetary reward programs are “very” or “somewhat effective” for recognizing and rewarding top performers, motivating top performing employees to maintain level of achievement and improving employee morale.

How to Implement an Incentive Program

  1. Strategic planning. Starting with a plan may sound obvious, but many incentive programs have failed, when the purpose and all the steps were not considered ahead of time. Most important is to determine exactly what behavior are you rewarding. Narrow the focus to 1-3 behaviors and consider what rewards will have the greatest impact on those behaviors. While the short-term goal may be to achieve a lofty sales target, how can you incent specific behaviors which will increase sales in the long run, rather than reward "cramming" sales into this month? Consider the longer-term effects on production and logistics and on next month's sales. Will additional training be required? What is the return on investment if goals are met, or exceeded, or if you fall short? Do the rewards fit the culture as well as the budget? A good rule of thumb is to budget 10-20% of the expected sales or productivity gains on the incentive program. Beware, if a program has too few "prize winners", or the timeframe is too lengthy, or the goals seem unattainable, the effect may be to discourage everyone who feels they have no chance to win. State the program goals clearly with measurable, specific, written objectives with target dates, including milestones.
  2. Develop a rewards strategy. You may choose to call for help from a number of reputable rewards and incentives companies. If not, involve your employees in determining both the goals and the rewards. Giving employees flexibility here will make your incentive program more effective. And consider the impact that incentives have when involving spouses, significant others, and families. The kids may do more to help mom around the house if they know that her late hours this quarter may earn them a trip to Disneyland. And rewards like trips that develop into wonderful memories will have a much longer-lasting impact and more positively affect the organizational culture than cash which could be used to pay bills. Consider ways to reward all participants, even ones who cannot directly effect the outcome. Lay out a timeline for each step in the process and secure the necessary approvals before any money is spent. Two notes of caution: It might be advisable to consult with legal counsel to ensure your plan is fair and legal. And be sure to talk with an expert about the tax implications for winners.
  3. Launch and communications. The worst programs are ones where, weeks into the activity, members are still asking, "So what exactly are we supposed to do?" State the program goals clearly with measurable, specific, written objectives with target dates, including milestones. Hold a launch party or a press conference or find another way to create excitement around the beginning of the event. It may be appropriate to have a countdown clock, "12 days to launch...." Post visible progress tracking charts in multiple locations, then be sure to maintain them regularly. In fact, you may want to make a big deal of the updating of these numbers by making updates into events too. Keep information flowing with tips, hints, techniques, and suggestions. Stick with the original plan and be consistent; don't change the rules or measures of performance in the middle of a contest. In all communications, remind the participants why they are doing this.
  4. Present the awards. Keep in mind that genuine expressions of gratitude by management are at least as important as the rewards themselves. Present the awards with fanfare, but be sincere in your appreciation. Be sure to include every possible employee or team member in the ceremony, not just the leaders or managers. Share your excitement by inviting other departments, the local community or family members, or even the press where appropriate.
  5. Measuring, debriefing, adjusting. Solicit feedback from all stakeholders in the program. What worked and what didn't? What could be improved? Were the goals met? What was the impact on profitability, production, customer satisfaction, corporate culture? Sit down with the members of the planning committee and the winners of the program and seek their input. Consider the next incentive program. When is the right timing? Should it follow the same theme and risk becoming "old" and ineffective? Should the next program be entirely different and possibly work at odds with prior programs?

Incentive Program Caveats

But while we observe the effectiveness and prevalence of incentive programs, return to the question: "What are we trying to accomplish here?" The obvious answer may be to increase sales, or improve safety, or reduce defects. But at the same time, are you creating a "culture of bribery"? By implementing incentive programs are you establishing a precedent with a slippery slope so that your workforce will begin to "sandbag" until the next reward program is announced?

In his book, The Case Against Incentives, Harvard professor Alfie Kohn warns that incentive programs can lead to destructive competition if the perception is that the program is about winning versus improving performance.

Used sparingly in an effort to achieve extraordinary goals, or judiciously when requesting efforts which go above and beyond the normal call of duty, incentives can be an effective way to get more from your already dedicated team. Used too often, workers become jaded to the incentive, like consumers who hear and see the word "SALE" in every newspaper and TV commercial. When programs are ongoing or too numerous, they simply lose their effectiveness.

Long before you consider incentives, though, be sure you have the right people in the right jobs. Otherwise your efforts at incenting your workforce may be simply an expensive expense.


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