Updated March 16, 2022
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Too often, managers don't use strategic thinking when creating employee incentive programs. Without structure — i.e. taking a step back to really contemplate business goals, long-term plans and the necessary steps to achieve these goals — these programs have little chance of success. In fact, they might even inadvertently cause inappropriate practices and higher costs than budgeted, which can negatively impact the program, employee attitudes and damage the intended purpose of the program. Before the incentive program even begins, employers should take a moment to define the terms of the incentive plan, the meaning behind employee performance and all that comes with a title such as "top performer." Following are 10 best practices to ensure incentive-reward programs are well structured and deliver desired results.
10 Steps for Designing a Successful Incentive Program
Define the Incentive Program Criteria
You don't have to reward every positive action or behavior. Sometimes all you need to do is acknowledge a person's actions and recognize them for the good they are doing. And when you do need to reward someone, tell them the results that merited being rewarded.
Clearly Explain Program Rules
Managers need to know when and what to recognize, when to reward employees and what to reward them with. Create a decision matrix using a set of criteria that fits your industry and the applicable job tasks, so managers know what to recognize and the value of the rewards to give each person.
Separate Recognition Practices from Rewards Programs
It is essential to differentiate between rewards and recognition. When you give recognition, you don't have to give a reward, but when you reward someone, always accompany it with expressing recognition.
Consider Behavior Action/Frequency
The frequency of a behavior or action determines whether to reward them. If the behavior or action is an isolated occurrence, it does not merit generating a reward. However, if it happens consistently, then it could lead to giving a person a reward.
Determine Performance Metrics
Check the impact the individual's behavior or actions had on people they work with or serve. If actions were of minimal impact, then the reward should likely be of a smaller value. The greater an impact is, the larger the reward should be.
Plan for the Program's Impact on Team Members
When just one person benefited or was affected by an employee's actions, this requires a smaller reward level. If many people were affected, a larger reward is merited.
Map Out Employee Rewards
Some employee actions influence not only people but also drive business results. Business performance can be of varying degrees. Depending on the results achieved, the reward amount should reflect the differences.
Determine Strategic Significance
Depending on how important the organization views the strategic initiative or the business goal the program was designed to promote, this can determine the value of the different rewards being considered, based on each person's achievement.
Consider Short- and Long-Term Program Goals
Some programs are designed to drive more than one result (e.g., behavior and business goals); in such cases reward values should increase proportionately to reflect employees' achievements in all areas.
Ensure Values and Ethical Behavior
Programs should be designed to be in line with ethical business practices and the organization's values. Employees should always be encouraged to do the right things for the right reasons, rather than reaping rewards at any cost.
Roy Saunderson is the chief learning officer at Engage2Excel where he provides consulting, learning and thought-leadership services focused on helping leaders and managers give real recognition the right way.