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10 Tips for Structuring an Incentive Program

Effective strategies for designing motivational rewards.


Too often, managers don't use strategic thinking when they create employee incentive-reward programs. Without structure, these programs can inadvertently cause inappropriate practices; higher costs than budgeted; which can negatively impact the program; and negative employee attitudes, which damage the intended purpose of the program. 

Following are 10 best practices to ensure incentive-reward programs are well structured and deliver desired results. 

  1. Define 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.
  2. Make rules and rewards easy for management. 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.
  3. 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.
  4. 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.
  5. Determine the impact on others. 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.
  6. Consider the extent of the impact on others. 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.
  7. Consider performance results. 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.
  8. 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.
  9. Consider all impacts of a program. 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.
  10. 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.

Incentive columnist Roy Saunderson is the author of Practicing Recognition: How to give meaningful recognition to people every day. Saunderson is the chief learning officer at Rideau Recognition Solutions where he provides consulting, learning and thought-leadership services focused on helping leaders and managers give real recognition the right way. He can be reached at [email protected], followed on Twitter @RoySaunderson and through his AuthenticRecognition.com blog.