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Incentivisation

Updated on October 10, 2013

Introduction

Companies have a range of approaches to incentivising their staff, and in some cases they do not do it at all for anyone other than the senior management and the sales teams. So is it necessary, and what should you do?

An employee's needs

People have different needs when it comes to what motivates and encourages them. Some are driven by financial incentives, whilst others prefer recognition – either amongst their peers, or in a wider industry context. For example, as a generalisation, sales people tend to value financial rewards: bonuses for achieving sales targets; and often also value internal awards, e.g. “Salesman of the Year” events where top performers are recognised in the presence of their colleagues and given a trophy and a reward, such as a holiday to an exotic place. Television programme makers value the praise of their peers through BAFTA awards, and film makers want to win Oscars – wider industry appreciation for their craft. However, what are the best rewards, in terms of providing an incentive, for engineers, secretaries, accountants, marketing staff, administrators, etc. and do they need to be incentivised at all?


I believe that everyone likes to receive some recognition when they do well, or have made a valuable contribution to the company doing well overall, but for many, they don’t need it, or want it, to be high profile. A reward which simply demonstrates their bosses appreciation of what they are doing day in day out, or for something special they have achieved, is often all that is required. I remember once when I went far above the call of duty working overnight for two nights, and received no recognition for it at all. All I wanted for for my boss to say ”Thank you for all you did, it was really appreciated.” That would have been enough.


It is important to remember that a financial reward is not the beginning and end of incentivisation, and a very small financial reward can have the opposite effect to that intended, and be seen as an insult.


Affordable Incentives

If you have lots of staff, or are a small business, then you probably cannot afford to give lots of your staff bonuses upwards of £1000, and I would caution against ever giving anyone a cash bonus any less than this. I have seen managers give bonuses for “consistently excellent achievement over the year” of £200. The recipient works out what they will receive after tax and any other deductions (maybe pension contribution, for example) and feels that this is more of a kick in the teeth, than a reward: ”Is that all you think my ‘excellent contribution’ is worth?” If your budget is that small, then offer a meal out for the person and their family at a good restaurant, or a track day, or a day at a theme park, or something where the experience is the reward, rather than the basic financial value of it.

A personal example

As part of changing a company culture to make everyone more customer focussed, I ran a scheme for a while where any time a customer praised one of my staff, I gave the member of staff a bottle of champagne. The financial value was small, but the gesture encouraged the right behaviour, and was seen as positive. Of course, you need to inform your customers that you are running this scheme, to encourage them to give positive feedback when it is deserved, and you should notify a customer who has given good feedback, that their feedback has resulted in your member of staff, who they gave praise to, receiving a bottle of champagne. This lets the customer know that you are actively encouraging excellent customer service, and let’s them know that their positive feedback is being acted upon to encourage others to behave in a similar way.


With such a scheme, it is important to have alternative “prizes” for people who do not drink alcohol, and it is also important to change the reward every 6 months or so, otherwise the novelty, and thus the perceived value, of the reward becomes diminished, and the incentive is reduced. You could give out company-logo’d umbrellas in the winter, boxes of golf balls if the recipient is a keen golfer, tickets to the theatre or opera if the recipient is keen, etc. The only limit is the limit of your imagination.


Larger rewards might be holidays to exotic locations, a place on a course (and time to attend it) that the person wants to go on (not necessarily related to your business), gym membership or other club membership for a year, a subscription to a magazine, etc. Again, think creatively, and try to provide something for every taste, hobby and interest. The more variety of rewards you have, the more they will be appreciated.


My own view is that money is one of the least effective incentivisation rewards for most people. For a few, who are highly money-driven, and where the rewards are substantial, it may be effective, but in general, unless the recipient spends the money on something special that they will remember, or benefit from for a long time, the reward is quickly forgotten and its positive effect is thus lost. A memorable experience, or a valued prize, often has much longer-lasting positive effect.


Team rewards

It is important not to forget group rewards. More often than not, an achievement is a team effort, and it would be wrong to reward just the more high profile members of the team, so a team day out can be an excellent reward, and has added benefits of creating better team bonding and allowing the team to spend time together without the pressures of work upon them. Again, it is important to choose the activity carefully. Do not send a group of very intellectual, non-physically-active people on an assault course day, or paint-balling, when they’d prefer to go to the opera, or on some kind of educational field trip. Remember this is a reward, not a management training exercise, so do not make the mistake of trying to kill two birds with one stone and do something “worthy”. There is no harm is asking the team what they would prefer to do for their day out.


One team reward I received consisted of a “treasure hunt” around London, followed by a trip on the London Eye, and an evening in an indoor amusement park, all rides paid for. This followed a very tough couple of years, in which everyone had worked very hard, and there were still a raft of difficult issues to sort out ongoing. My initial thoughts were that this was a waste of time, as we really should be sorting out the difficult issues and planning the way forward, but the effect on the team morale for months after was clearly noticeable. Sometimes, even when the times ahead are looking tough, you just need to take a break to clear your collective heads and have some fun, as spirit-lifting preparation for the battle ahead.


The Importance of Consistency

Consistency is also important when creating incentivising rewards. A sub-division of a major global company had a company performance bonus scheme which extended to all staff. This is a good idea, as it creates a “them and us” divide to reward managers and not reward the “foot-soldiers” when the company has a good year. However, they messed up by setting different parameters for the bonus awarded, out of a valid intention to incentivise managers for the things they had some influence over, and to incentivise the foot-soldiers for the things that they had some influence over. Unfortunately, one year the criteria chosen resulted in the management receiving large bonuses, whilst the foot-soldiers received nothing. This reminds me of some classic lines from “The Office” where the boss said something like, “As the result of this merger, the bad news is that a lot of you will lose your jobs. The good news is that I have been promoted. What….why are you looking so glum…are you still thinking about the bad news?”


There is no easy recovery from this bonus situation. They tried offering £20 book tokens to the staff, and that just added insult to injury. The company had to amend the bonus criteria for the following year so that everyone had the same criteria, but there was a lot of bad feeling for a very long time. This was made worse by a mis-calculation of the bonuses for the following year, resulting in the company then demanding that all staff paid back a proportion of their bonus that they had already received, and many had already spent. If ever there was a way to make what should be a positive, incentivising gesture into a negative, de-moralising gesture, then this was it. Had I been in charge, I would have let people keep the bonuses that they had been paid for that year, and tweaked the criteria for the following year to make the payouts slightly less generous, and thus recoup the money that way, or better still, just put it down to experience, let people keep their bonuses, and move on. I appreciate that there would have been many good reasons why the money should be recovered, and I don’t know how much the total overpayment amounted to (I’m guessing around £2million, which would have put a noticeable dent in the EBIT for the year), but the fall-out of the negative feeling generated, was, in my opinion, too great, and they should not have recovered the money in the way that they chose to.


Conclusion

So, to conclude, I believe that incentivising all of your staff in some way, or preferably in many assorted ways, does improve their feeling of worth and job satisfaction, which leads to staff retention and higher staff productivity. However, as we have seen, it requires much thought and careful consideration, otherwise the effects can be the opposite of the intention, and you can insult and dis-incentivise your staff as a result.

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