11 OCT, 2016

5 Easy Ways to Totally Ruin Your Employee Incentive Program

Jar with dollar bills on wooden desktop

Incentive programs are designed to drive results through healthy competition. A successful program can increase employee effectiveness and even improve job satisfaction. While the concept of offering incentives isn’t new, many companies are still trying to figure out how to create incentive programs that actually work.

Want to create a successful program? Avoid these five common employee incentive program mistakes:

Problem: Incentives aren’t tied to actual performance.

Your incentive program needs to be carefully constructed with attention given to individual performance, not just the business. If an incentive is awarded based on overall growth of the business, but something in the market changes to negatively impact the business, is that a reflection of employee performance?

For example, if new technology disrupts an outdated industry and the business suddenly loses 10% market share it may be impossible for an employee to receive an incentive. In that case, the incentive discourages—rather than encourages—performance.

Solution: Attach incentives to individual performance that are based on ethical business practices.

Problem: Your incentives encourage the wrong behaviors.

As we learned from the recent Wells Fargo debacle, deploying incentives without regard for the company’s core values and just plain ethics could result in disaster. Incentives should never create a high-pressure sales culture that encourages employees to sell customers eight new products simply because “eight rhymes with great,” as was reportedly the situation at Wells Fargo. Incentive contest parameters should take into consideration any repercussions, even less dire ones, such as incentives for customer service reps to keep calls short or to resolve a certain number of issues per day. These numeric goals can thwart your actual aim, which is to please customers, as those who need help are rushed off the phone or checked off without having their problem fully resolved. Solution: Keep in mind the ripple effects incentive targets can cause.

Solution: Keep in mind the ripple effects incentive targets can cause.

Problem: It’s only about incentives, not about recognition.

Sure, some employees are motivated and driven by an incentive. However, you need to understand the motivation drivers for all employees and create an incentive program that addresses financial and competitive motivators.

You should also integrate a recognition program outside of your incentive plan that motivates employees (the majority) who are inspired when their efforts are appreciated. For example, if you have an employee that gets their work done on-time and under budget with 90% accuracy they should be recognized for their hard work. Depending on how your incentive program is set up an employee might not receive an incentive in the situation outlined above, but it’s important that they receive some form of recognition.

Solution: Drive engagement by using a balanced approach that includes incentives as well as discretionary recognition.

Problem: It’s outdated and unrelated.

As an incentive, an employee receives a $50 gift card to a home improvement store. It’s a great reward, right? Actually, not really. The nearest store is 100 miles from where the employee lives. And the employee rents an apartment, in which they can’t make any home improvements. And the incentive was for meeting operational goals – where’s the connection? To prevent incentives from becoming outdated and unrelated, have a system in place and regularly review the program to ensure it meets current needs and has a direct link to performance.

Solution: Find a system that helps you manage, update, and integrate a variety of options that fit your overall strategy for engaging employees.

Problem: It’s late.

Employees who work hard to reach goals and earn incentives don’t want to wait until the next quarter, fiscal year, or performance review to get their reward. You might be able to wait until the next sales meeting to highlight the employee’s performance, but make sure they receive their incentive before then. Delayed gratification doesn’t do much to incentivize future positive results.

Solution: Plan and prepare for timely incentives with a strategy, budget, and overall objective that drives the program and helps employees take control of their success.

There’s great value in incentive programs when they are handled well. In fact, they’ve been shown to improve individual performance by 22%.


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