Do incentives really motivate increased productivity? Do rewards guarantee repeated behavior? If you believe they do, then you’ll need to reward valued and productive employees – but only if you want to keep them. If you think your workers feel entitled to wages, then build incentives into employee productivity.

I should point out that a structured incentive program is not for every situation. It requires thought, advice, communication, and a real commitment to see it through.
Let your compensation consultant determine your business readiness for an incentive plan, but you can anticipate a few basic ideas:

  • Individual Performance. Give an employee $10 every time a customer commends his/her performance. Hand a receptionist a gift certificate for every five callers qualified as sales prospects.
  • Department Performance. Divide a cash prize among department workers when they exceed a target. For example, spread cash among customer service reps if satisfaction surveys hit the target or if they meet an attendance goal.
  • Overall Performance. Pay a bonus to everyone if the business meets its overall goals. (You can tier the distribution and require employee longevity.)
  • First pay a living wage. If workers are not paid fairly in the first place, there is no incentive in improving your profits.
  • Understand that cash is not always the most effective incentive. For example, employees are more likely to be motivated by improved health or pension benefits.
  • Performance problems may not be resolved with incentives. For example, poor performance may reflect poor morale that may be turned around with a change in equipment, supervision, or communication.
  • Provide metrics for goals that are reasonably achievable. You cannot measure attitude; you can measure attendance. You cannot measure product knowledge, but you can count quality rejects.
  • Communicate clearly, thoroughly, and repeatedly the terms and conditions of the program. It is good to promote competition, but you’ll lose if the plan seems unfair or inconsistent. You might be surprised how hard it is to sell employees on their own benefits.

DO not do this on your own, and don’t even think about it if you are not willing to commit to honoring it for at least a targeted number of years.


by Steven Schlagel