Employee incentive schemes are designed to motivate employees, rewarding them for hard work in their jobs.
Business schemes vary greatly in the type of rewards given, and can be monetary or non-monetary, but they are usually put in place within a specific time frame, and employees are encouraged to work towards specific targets, at which point they are given their reward. This article will look at two things in more detail:
- How to set one up
- Are they worth it?
In a survey conducted by Globoforce in 2016, 46% of HR professionals cited employee retention/turnover as a major issue in their business. Many businesses use employee incentive schemes to keep productivity high, boost morale and retain employees, but it is worth considering if they will work for your business.
How to set one up
Setting up an employee incentive scheme is something in which leaders and managers are able to be creative, tailoring them to the needs of their business, as well as the needs of their employees. Here are some key tips/ideas:
- Set out objectives – what is it you want from the scheme? Whether it’s giving staff better skills, increasing margins, or lowering employee turnover, know what you want to get out of it, this will allow you to evaluate its success.
- Set out targets – Set out specific targets for a team or an individual. It is important you include everyone in different schemes, so nobody feels alienated, but it is also worth tailoring them to different people/groups who can get more out of them. The most important part of setting out targets is clear communication and getting the balance right between ambitious and achievable.
- Timing – Working to a clearly set out time frame is crucial, not only will it keep everyone in the loop on the importance of projects in the business, it means everyone can assess the work they need to do, and complete it to the best of their abilities. Setting out a clear time frame means you can resist the urge to micromanage, something that devalues the importance of reward schemes. Split long-term goals into shorter ones so people have something to be working towards all the time and don’t slow down.
- Rewards – Be creative in showing appreciation for your team. Monetary rewards are an easy incentive for people; ask them what they want or like, so they are fully incentivized to work, and you’re not just giving them something they don’t want. Non-monetary rewards, such as praise, more paid holiday and more autonomy in their roles are also crucial, and since they are often more related to the job itself, may promote a greater work ethic.
- Measuring success – Lastly, in order to know whether your scheme is working or not, you need to devise ways of measuring its success. We will be looking at how successful reward schemes are measured for businesses as a whole, but you will need to measure specifically for your company. Ask people involved in the scheme what they thought of it, as well as measuring profits/margins numerically through business records.
Are they worth it?
There are valid arguments for yes and no as to whether incentive schemes are worth the time and money. One of the main issues people have with incentive schemes is the idea of a ‘carrot and stick model’, which is viable for achieving short-term goals, but doesn’t inspire any real investment in the company from employees.
The real solution to this problem is creating incentive programs that reward based on the values of the company; ‘values-based recognition’ has been found to be much more successful than non-values based recognition.
In Globoforce's survey report, their research concludes that 90% of HR Leaders said that engagement was positively affected by values-based recognition, while it was just 73% with non-values based programs. Retention was also affected – 71% of values-based programs had a positive impact, while only 54% of non-values based programs did the same.
If you want your investment scheme to be successful, it is important to think of it as a long-term thing, according to the Trends in Employee Recognition report by WorldatWork, ‘46% of respondents believe senior managers view recognition programs as an investment rather than an expense’, and this is a good thing.
By creating a program that gives long-term results, though it may take time to be fruitful, you can encourage a culture of employees being invested in the program, and the business, and this incentivizes workers to stay with the company.
If you are meticulous in creating programs that help employees improve, as well as building strong morale, your business will thrive. It is really important that you put time and effort into making nuanced programs for your business, instead of just relying on the most obvious options. Bersin & Associates report that, ‘Organizations with the most sophisticated recognition practices are 12 times more likely to have strong business outcomes’.
Turnover rates are also affected by recognition programs, and ‘Companies that scored in the top 20% for building a “recognition-rich culture” actually had 31% lower voluntary turnover rates,’ as stated by Forbes.
Ultimately, the most important part of setting up a successful scheme, and the thing to think about when considering whether to implement one, is that they can be extremely successful, but cannot be seen as a replacement for productive employees or a workplace with good morale.
You should use reward schemes to build on the strength of your workforce, and improve the work ethic of your employees, but make sure not to substitute a well-run workplace for incentives.
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