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4 Tips on Using the Right Incentives in the Workplace

by Richard Correia

Every business offers incentives in the workplace. The most basic incentive is compensation – the pay that we receive for doing a particular job. Long ago, a paycheck was enough to motivate employees. Not anymore. Today, businesses and organizations juggle all kinds of incentives in the workplace to make sure employees are productive, excited, and loyal to the company. Incentives in the workplace are used to recruit employees (e.g., competitive compensation packages); to nurture desirable behaviors (e.g., teamwork); and to achieve productivity and performance goals (e.g., KPIs) that the business deems critical to its ongoing viability and success.

There are so many kinds of incentives in the workplace, it helps to break them down into these four categories:

  1. Compensation incentives include commission plans, raises, bonuses, health benefits, profit sharing, signing bonus, stock options, flex-time, and more. It is important to have the right mix of compensation incentives for each type of job and each employee your company wants to hire and retain. Companies invest significantly to make sure their compensation incentives are attractive and competitive.

  2. Reward incentives use items such as gift catalogs, gift cards and cash vouchers to reward outstanding performance or exemplary behavior. This category also includes educational opportunities that will advance the development of employee talent. Another incentive is the referral reward that pays a “finder’s fee” to employees who refer a suitable job candidate who then is hired and becomes a successful employee of the company.

  3. Recognition incentives are used to acknowledge and thank employees for a job well done, a milestone met, personal effort beyond the call of duty, or any accomplishment that exemplifies the goals and behaviors that the company wants to promote. Recognition comes in many forms – from a public recognition ceremony at periodic company meetings to daily posting of top performers on a gamification leader board. Often, recognition is combined with a reward.

  4. Appreciation incentives show employees that they matter as individuals – not just as workers. To show appreciation for all the time and effort people dedicate to work, companies host social events such as holiday parties, ice-cream socials, team outings, and off-site lunches. They sponsor sports teams for employees who want to compete, and celebrate birthdays with a personal gift certificate. There are so many ways to show appreciation. The key is to choose the incentives that your employees value most.

Which incentives should you be using in your workplace? Here are four tips for determining what will work and what won’t.

Tip #1: Incentives in the workplace should promote the behaviors you want to encourage, not just the goals you want to achieve While this sounds like a no-brainer, many incentive programs have not delivered the expected results. The problem usually lies in focusing only on the outcome you want to achieve and not on the actual behaviors that will lead to that outcome. It’s a fine line but very important distinction that can make the difference between success and failure. It’s all too easy to unwittingly encourage the wrong behaviors.

For example, if only individual KPIs (such as a sales quota) are rewarded, employees may be incentivized to hoard information and work independently rather than as a team – creating a competitive “every man for himself” atmosphere. You may even achieve the sales numbers you want, but at great cost in terms of employee morale and retention. On the other hand, if incentives are based on both individual and team achievement, employees will share critical information and successful methods; pick up the slack if someone falters, and work together to make their numbers. In this way, you not only achieve your sales goals, you also create an atmosphere of camaraderie and cooperation that is beneficial to employee morale and retention.

Tip #2: Avoid turning incentives in the workplace into entitlements When you use the same incentive over and over again, you risk turning an incentive into an entitlement. For example, consider the company that recognizes and rewards three outstanding employees at each quarterly company meeting during the year. In anticipation of the meeting, department heads nominate their candidates and management chooses among the nominees. At first, the recognition ceremony is special and the recipients are diverse. But after several iterations, the ceremony becomes perfunctory and loses its impact on employees. Even a simple change such as recognizing only one outstanding employee this quarter (and not the “mandatory” three) or rewarding a team effort instead of an individual, or doing it only twice instead of four times a year can make the recognition incentive special again.

Tip #3: Find out which incentives in the workplace make employees happy There’s no need to reinvent the wheel when looking for incentives in the workplace. A good place to start is with Fortune magazine’s annual edition of The 100 Best Companies to Work For. There you will find everything from comprehensive incentive programs with multiple metrics that are scrupulously measured and analyzed, to modest incentives that simply make employees feel good about coming to work every day.

Many of the incentives that are valued most by employees do not cost a “fortune.”

Tip #4: Low-cost, big-impact incentives in the workplace One of the fallacies of incentives in the workplace is that they are expensive and companies cannot afford them. While raises, bonuses and promotions are highly valued, they are seen as part and parcel of being an employee, and these rewards are indeed costly. However, incentives that transcend the employment contract and seen as special perks are greatly appreciated by employees, especially those that recognize the personal time and effort they devote to their work and to the company. These are not so costly.

Surveys indicate that employees really appreciate flex-time that allows them to be with their families or pursue their interests. Another favorite is gift cards that they can spend on themselves or on loved ones. Even a simple handwritten thank you note can go a long way toward making an employee feel valued and appreciated.

Benefits of incentives in the workplace While your company will gain a lot by implementing a comprehensive incentive plan, even targeted incentives can help to boost:

Loyalty and Employee Retention: Incentives that recognize employee efforts and achievements, even in modest ways, result in employees who are more loyal to their company and far less likely to seek greener pastures elsewhere.

Motivation and Employee Engagement: Incentivized employees are eager to engage with the work they do and to perform.

Productivity: the express goal of many incentives in the workplace is to increase productivity and efficiency. If your incentives also result in happy and satisfied employees, you may even surpass your goals! Read more about NICE’s performance management solution in our webpage.

Richard Correia Richard has many years of experience in Product Management and Product/Solutions Marketing, with time at Cisco, Turin/Force10, Dell, and CyrusOne. Accomplishments include managing the product direction and revenue of Turin/Force10 data center solutions from a few million, to just under a hundred million. At Dell, he was focused on marketing the different hardware and software components of the data center solutions. At CyrusOne, he changed the direction and strategy of marketing, focusing on greater ROI. Richard holds a bachelor's in Mechanical Engineering from University of Rhode Island and advanced degrees in Business & Engineering from Southern Methodist University.

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