Have you struggled to put in place a consistent incentive plan that really works?
How many incentive plans have you been given, or given out, over your career? We find that some companies change their incentive plans about as fast as they change their shorts.
Usually this is because the plan is not performing as expected; Employees do not change behaviors, they are too expensive, or administration is too complex.
Here are some key elements to a great incentive program. You should ensure all of these are found, within your incentive structure.
- Self funded by the targeted improvements.
If the program pays for itself, it is much easier to keep it going. Importantly, this allows you to feel good about the investment you are making.
- Must change behaviors of participants
Incentive plans should specifically alter, in a positive way, the behavior and actions of your workers. If you do not see them doing anything different, why have a program?
- Team members should feel in control of outcome.
If employee feels that they do not really control the achievement, of the goals in the incentive plan, they do not actively work to improve at the same level. It is critical to link incentives to specific improvements, ones the employee can at least somewhat personally control. Their “ownership” of success is what shifts behaviors.
- Timeliness of rewards
For hourly workers, on weekly or bi-weekly paychecks, a Quarterly Bonus might as well be never. It is just too far away and decoupled from their day-to-day activity. A “Christmas Bonus”…that might as well be a death benefit. They have no connection to that money, on any given day, except maybe the night of the company Christmas party. Rewards must be “chronologically proximate” to the behavior. For our team members who are, in reality, living financially somewhat “paycheck to paycheck”, this means rewards should be, literally, on their next paycheck.
- Financial Openness
In a great incentive plan, there should be some level of employee insight, specifically to financial impact of the behavior change it is looking to create. Hourly workers often feel like incentive plans are arbitrary. We share that they will receive X for accomplishing Y, but they simply do not believe that the company will keep its word. (Usually this is grounded in experience). Instead, share with them the financial objectives or triggers that create the rewards. This demonstrates the team nature of your business and often gets more employees to “think like owners”. The transparency is rewarded by a commitment to achieving goals.
The program must be super easy to understand. If you cannot explain it with 2 numbers, in 2 minutes, you probably lost them. Simpler, the better.
Research shows that it is important for incentive plans to be consistent, so come up with a plan that meets the above best practices. Then, stick to it for at least a year. Give you team a chance to get used to the program and know how expectations, personal performance and rewards all come together.
Importantly, measure KPI before and after the program, to make sure it is delivering to expectations. If you would like more insights to bonus programs, recruiting, motivating and retaining the best workers, plus how to get the most productivity from your team, subscribe to our newsletter.
Incentives work, but plans must be organized to succeed. Follow the above best practices to get the most benefit from your program. Getting this right can have exceptional results and push your company culture and finances even higher. If you are looking for a ready-built solution, check out Protiv. Set a meeting with us to talk about your company’s needs and next month your company performance could hit a whole new gear.