Employee Incentives that Work

After four blogs on the long term motivations for running a business, perhaps it is time to return to some more practical advice. One of the most persistent issues for a business owner is trying to motivate employees with incentives.

You install a perfectly good incentive plan. It gives the employee opportunity to make more money, or to enjoy a perquisite outside his or her normal compensation. You roll it out with appropriate fanfare. The feedback is positive. The workers are excited. Then…nothing.

What happened? Was it the plan, the goals or the employees themselves?

Frequently the answer is all three. Here’s a quick primer on why each element in the process can fail, and how to work through it.

The plan may not have been easily understandable. If it requires the employees to wait until management tabulates the numbers and tells them if they’ve won or not, it is worthless. It’s like bowling under a curtain. Effort, noise, but no idea of where you are in the standings.

The goal must be achievable. I often recommend a goal in the beginning that is the same or only a little more than what they do already. You need to get the employees into the habit of winning, but winning with effort.

Employers get lazy with incentive plans. They try to tailor a one-size-fits-all. If the employees succeed in earning $100 each in the first bonus period, then logically they’ll want to get $200 each in the second, right? Actually, no. They will usually try to earn the $100 again, and again. Increasing performance requires a willingness to change plans often. It also means changing them even when they are working, before they run out of steam.

Aaaarrgh! I can hear the moans in my reader community. “It’s hard enough to develop one plan. How am I supposed to keep coming up with new things all the time!”

Actually, it’s easy and effective. Use the old BCG (Boston Consulting Group) two-by-two matrix. That’s where you have four sectors, and each represents a combination of two factors. My thanks to Gerald Stowers, the President of Execupay for showing me this one.

Draw a square on a piece of paper. The divide it into quarters by bisecting it top to bottom and left to right. Then label the Y axis “People” and the X axis “Type.”

We are going to vary the incentives by two factors: whether they are for a group or an individual (People), and whether they are monetary or non-monetary(Type). You should wind up with something that looks roughly like this:

A short guide to the types:
  • Group-Monetary: “If the whole team averages 85% customer satisfaction, there will be a $100 bonus for each team member.”
  • Group Non-monetary: “If everyone on the team opens at least one new account this month, we’ll all have a pizza party.”
  • Individual Monetary: “The highest producer will receive a $500 bonus.”
  • Individual Non-monetary: All kinds of things.Trips and tickets are popular, but this category includes a lot of recognition. Trophies, pins, plaques and such.
Most business owners are Hunters, as the introduction to this blog suggests. They lead teams, but expect to reap individual rewards for their efforts. Not all of your employees are the same as you.
Some are hunters, of course, but even so they may not be all that motivated by money. Recognition, or a change in the routine (an extra 3 days of paid vacation) may excite them a lot more.
Your farmers are more likely to be excited by helping everyone. “Let’s all do this together” is their battle cry. Of course, the hunters involved in these type of programs will be the ones to pressure the low performers. Team incentives work because the motivated individuals push the team for their own benefit, while the team players do it for everyone’s.
Change incentives regularly. If something works well, don’t just ride it until it becomes ineffective. Terminate it according to schedule. If it was popular, it will just be that much more exciting the next time you use it (with a higher goal, of course).
Keeping incentives fresh, simple to track, and varied enough to appeal to different personalities will make them far more effective. 
Categories: Incentives, Managing Employees... Bookmark this post.

Leave a Reply

Your email address will not be published. Required fields are marked *