A guide to incentives
Incentives can be hard to get right.
It’s not that their benefits are particularly hard to measure: research shows that organisations that use incentives see higher profits, sales, loyalty, productivity and stock value than those that don’t.
It’s not because there’s a lack of compelling cases to use them either: incentives are great for improving productivity, driving sales and motivating teams towards particularly tight deadlines.
They can even help to differentiate standard benefits packages in order to attract and retain top industry talent.
No, the problem is more that incentives say something your organisational culture: how you measure hard work, how much you value individual contributors, and what kinds of behaviours you reward.
Here’s our simple guide to thinking more strategically about how much to invest, what to invest in, and how to structure your benefits programme.
Audit existing incentives
The first step is to ask the following questions of any previous incentives that your company or team has run:
- Have our incentives had good return on investment?
- What incentives do our competitors run, and how do they compare to ours?
- How have our previous incentives impacted our productivity?
- Was the reward fair to each employee?
- Did staff require extra training or information to hit their targets?
Your answers should identify the strengths and weaknesses of your current approach, and help to plan your next programme. Pay special attention to competitor programmes – they can seem disproportionately attractive to any current staff considering their options.
Decide what the aim is and how to measure it
Every incentive should have a point. If there isn’t a clear aim attached to the incentive, it’s not worth it – for you, or your employees. Make this as simple as possible – one short sentence if possible.
If you’re struggling, try setting SMART objectives. SMART objectives are Specific, Measurable, Achievable, Realistic and Time-bound. These criteria create clear structure and help each staff member understand exactly what needs to be done to meet the target.
This isn’t to say incentives only work with a narrow focus. For instance, if you have a business-wide target of increasing the speed of production, consider accepting (and incentivising) contributions from employees closely connected to the tasks and processes involved. They are likely full of innovative ideas that might otherwise have been very expensive to come by.
Similarly, don’t feel restricted to monetary targets. If your team isn’t sales based, consider metrics like deadlines, task completion or customer satisfaction. Break down the job roles in your organisation and evaluate the different kinds of work that merit some reward – whether or not they’re connected to the sales process.
Decide how much to invest
When deciding how much to invest, you’ll have to match the potential return on investment with the cost of the incentive. If you spend too much, you won’t see the benefit. Invest too little and you could end up offering a reward no-one actually wants. You could use the audit data or some simple calculations based on staff members hitting a pre-determined target.
You’ll want to make sure that the reward is in line with the effort required by the staff, as well as the profit potential. Remember to consider the National Insurance contributions required, and make sure to take into account the less obvious measures of success, such as customer satisfaction.
Decide on the incentive
The reward should match the effort required, and be motivating and interesting to as many staff members as possible. Cash is great, but it’s not the only option.
The best way to find something that works for everyone is to be open and transparent. Talk to your team, and pay close attention to their demographic makeup. White-knuckle thrill-seeking may not suit the more family-oriented among your staff, and a 5* weekend break might not be as motivating as a simple meal for two.
You should think about the length of the incentive programme. Research suggests longer is better: programmes that run over a year can deliver up to 44% performance increase, whereas 1-7 days can be closer to 20%.4 Not all companies and roles will suit longer incentives however, such as fast paced sales environments.
Organise and run the incentive
Once you know what the aims, targets, and rewards are, you can organise the incentive programme itself. This includes ordering or booking the reward, communicating the requirements of the incentive to staff and setting up measurement methods.
This is arguably the most important step. If staff don’t understand why they’re being pushed, or the degree to which you value that extra effort, incentive programmes can actually be detrimental to morale.
A company intranet is a great place to publish the rules and current progress and hand out informal recognition. You could also use email or a physical noticeboard.
Measure the output
Use the reporting functionality within your CRM to measure any changes to productivity and profit immediately and continually.
Track both overall and individual contributions. This data is invaluable to measuring the success of the earlier steps and improving future incentive programmes.
Consider making this system visible with a TV, computer screen, or daily email update. This will keep staff motivated, as will publicising outstanding performance.
After the incentive
If you don’t properly evaluate the success of incentives, you run the risk of undoing the progress made. They need to be a regular part of office life, rather than a one-off occasion. To evaluate the success of incentives you can use the SMART objectives decided upon earlier. This reduces the time of the audit stage of your next incentive, and makes it possible to evaluate the success or failure, and highlight any training or development needed.