Incentive programmes can improve performance by 20 to 40 per cent – but they must address specific needs or you’re wasting time, energy and money. Spending around two hours of salary cost per month for incentives is usually all that’s necessary.
Bob Cowen of Snowfly tells us how it’s done.
1. Provide immediate and continuous feedback and rewards
Generation Y and Generation X employees respond best to immediate reinforcement. Behaviours are shaped by closely tying praise and rewards with activities. Delaying rewards until the end of a quarter, month or week significantly reduces their value and benefit.
2. Look at an incentive programme as ongoing
Long-term incentive programmes produce twice the results of short-term ones. If you’re serious about permanently improving KPIs, an incentive programme must be continuous.
3. Give small daily rewards
Rather than offer monthly, quarterly and annual rewards, examine the sub-components that comprise them. A small daily reward for attendance with additional rewards for five days in a row will produce better results than a monthly perfect attendance award. Reward the daily homework, and the final grade will take care of itself.
4. Offer a choice of rewards
Management can’t be clairvoyant when selecting rewards. Award certificates and plaques look nice on the wall but do not change behaviour. Employees want to choose their reward – for example a reloadable debit card, although extra time off or other intangibles are also very popular.
5. Do keep it positive, fair, fun and exciting when earning awards
Everyone who qualifies must win something. The exciting part is finding out the amount. Playing games that generate a random number of reward points adds excitement to earning awards. Whether it’s spin the wheel, throw a dart, toss the beanbag or draw a number from a hat, not knowing the number of points brings suspense and heightens interest, further reinforcing the activity. Broadcast the names of big winners to keep the “buzz” going.
6. Don’t spread rewards too thin
Trying to monitor and reward too many metrics can cause each to have insufficient value to achieve employee focus.
7. Don’t distribute rewards in the payroll
By paying rewards separately from payroll, they are seen as special in the eyes of the recipient, reinforcing how the reward was earned. Additionally, the employee can spend the reward without waiting until their next pay-day.
8. Keep it simple by avoiding conflicting goals and objectives
The law of unintended consequences can cause conflicts. A goal of a higher sales conversion rate will increase average handle times. Improvements in quality scores or schedule adherence along with reduced turnover and absenteeism will undoubtedly lead to improvements in all other metrics as well.
9. Measure the ROI
If you’re not measuring the return on investment (ROI) of your incentive programme, how can it be justified? An incentive programme is the same as any other function; it must be continuously evaluated and tested with control groups or benchmarked with peers.
10. Don’t overload yourself with programme administration
Too great an administrative burden can cause burnout of even the best incentive programme administrators. Management’s attitude and opinion of your incentive programme is clearly visible to participants.
11. Do involve management
Team leaders, supervisors and managers should participate in your incentive programme. They should earn rewards themselves and distribute ad hoc or discretionary awards.
12. Do ask for feedback and keep it fresh
Take regular surveys of the participants to see what they like or want changed. Respond quickly to input. Actively solicit feedback and reward it.
13. Do brag about your incentive programme
Use employee comments about your incentive programme in the “careers” section of your website and in recruitment brochures.
14. Participate in outside surveys
A great way to evaluate your incentive programme against peer groups is to participate in surveys. Many are anonymous and often participation entitles you to a free copy of the report.
15. Don’t spend more than necessary
Spending more than 3 per cent of base pay on incentives does not produce additional benefits. Most companies spend 1½ to 2 per cent of base pay or about two hours of salary cost per month and achieve excellent results. Staying within budget will ensure that the programme continues and has an excellent ROI.
Bob Cowen is on the Board of Directors at Snowfly (www.snowfly.com)