Employee incentive programs can play a big role in boosting productivity and employee engagement. HR Leader details the elements of successful incentive programs and why HR plays an important role in them
Organisations around the world have tightened their belts as a result of the global economic downturn, cutting operating costs,
reining in staff expenses, reducing headcount
and curtailing payroll costs through flexible
working options. While such steps no doubt helped ensure
the survival of some companies, a greater focus on productivity through people would have also greatly assisted
executives struggling to hit their numbers, according to a
recent US report.
Conducted by the Performance Improvement Council
(PIC) – a strategic industry group within the Incentive Marketing Association – the report found that business leaders
can maximise their investment in employees by cultivating a
consistent culture of employee recognition that reminds
employees on a continuing basis that they are valued, despite
the turmoil that may be going on in the business.
“Nearly every organisation today is re-examining every
aspect of its business, debating every cost and looking for
even more ways to trim costs while still hoping to find effective ways to exploit competitive advantage,“ says Mike Ryan,
“People are clearly that competitive advantage; the challenge lies in finding cost-effective ways to unleash human
innovation, promote the right behaviours and keep the
right people performing to the optimum level despite the
David Parsons, vice-president of the Incentive Marketing
Association Australia (IMAA), says acquiring new customers,
retaining them and making them more profitable is the challenge for all businesses. “If you think about it, everyone in an
organisation plays a key role in the success or failure of these
three business drivers,” he says.
“Let’s start with the basic premise that every person in an
organisation contributes to its success. If this principle is true,
then let’s also consider the notion that all employees con
tribute differently – let’s call this employee performance.”
The level at which employees perform is fundamentally
influenced by drivers such as technical knowledge, experience, motivation and engagement, and Parsons says good
incentive programs are designed in such ways to support and
by definition, incentivise, these key drivers.
In practice, good incentive programs are tied directly to
behaviours that drive a superior level of performance, he
says. “The ultimate benefit of a good program is to incorporate program strategies that drive positive employee behaviours, reward and recognise employees for the effort, and
measure the outcomes – ensuring every dollar spent on
rewards and management results in an incremental benefit or
return to the business.”
There are a number of associated benefits to having an
incentive program that is aligned with business strategy. Grant
Arnott, former publisher of Marketing magazine and a board
member of the IMAA, says that, as businesses emerge from
the global economic downturn, the talent shortage will become
more acute and competition for good people will increase.
“As it becomes more competitive to recruit the right people, it’s a business imperative to incentivise and grow those
people in the organisation,” he says.
“Gone are the days where it was the norm to show people the door frequently. Companies now need to invest in
rewarding and recognising their employees in order to grow
the business. You can’t count on the fact that there will be a
ready-made candidate to take their place – and the cost of
recruitment is enormous so it’s much wiser to invest in keeping your staff loyal.”
A strong and effective incentives program can also support
employer branding, according to Arnott. This is equally
important for current employees, who reflect on the stature
of their company and how it values staff, as well as potential employees. “The better the employer brand, the better the
company is perceived as a place to work. A lot of companies
these days are finding a lot of value in that,” he says.
Elements of a good program
There are four main elements that should be considered in
development of any employee incentive program, according
to Parsons: program design; communications; rewards; and
Program design is vital in ensuring the right employees and
behaviours are targeted, complemented by the right earning and
redeeming structure and amounts. At this stage, he says it is also
important to consider things that can enhance a program
and/or offset costs such as tiering and the use of partners.
Parsons says it’s vital that the right communications plan
is developed to support the program and that fundamental
direct marketing principles should be applied to all communications activities. “It’s also vital to ensure that we don’t set
and forget,” he says.
“Having an incentive website up and running doesn’t
automatically create excitement and engagement with the
program. By identifying the right moment to create a dialogue with an employee and executing it effectively, we see
real improvements in program effectiveness and results.”
When it comes to rewards, he says it’s important to consider a program from an employee perspective – the “what’s
in it for me” factor. “Let’s start with a view that cash is
rational and a trophy is emotional, then we put these two
items at either end of a spectrum and fill the gap with items
such as gift cards, travel, experiences and merchandise – we
end up with a range of options that are more or less rational
or emotive than the other,” he says.
“A good rewards range has the right mix of emotive and
rational rewards, and by giving your employees choice, you’ll
achieve the best outcomes when it comes to leveraging this
range to drive and change behaviour.”
The final element in an employee incentive program is
measurement, and Parsons says that if you can’t measure
something you shouldn’t be doing it. “This principle applies
to the money you spend on rewards and incentives through
to communication effectiveness and engagement with the
program. All dimensions of a program are measurable and
should be considered as part of any new program,” he says.
Common incentive pitfalls
As with most HR or business initiatives, there are pitfalls
associated with employee incentive programs. Arnott says
one of the fundamental mistakes is not aligning a program
with overall business objectives. “A program should not exist
in isolation. It needs to be engaging so that employees can
engage with the program and the business – they need to
want to participate and be incentivised to contribute to busi
ness goals,” he says.
Managing expectations is also a common issue with such
programs, and Arnott says it’s important to make sure they
will work in a scalable way across an entire organisation. “In
other words, you don’t want disparity between different divi
sions so that particular employees are rewarded over others.”
Another common pitfall is losing control of budgets,
according to Parsons. “It’s easy to give away lots of points,
however if you’re not budgeting for it, then the conversation
with the finance team at the end of the month can get uncom
fortable!” he says.
No accountability or ROI reporting is another common
mistake, and Parsons says good programs provide the infor
mation that HR leaders need to clearly articulate the value
of the spend on the program to finance and management.
“When the program is designed well, it will work. When
it is working it will be producing measurable returns to the
business. When HR can demonstrate the ROI that an
employee incentive program is delivering, it makes life much
easier in developing ongoing commitment to recognising and
rewarding employee performance with incentives,” he says.
The Incentive Show
The Incentive Show is the largest exhibition and learning event in Australia devoted to helping organisations grow sales, improve marketing effectiveness and build customer loyalty, and both Parsons and Arnott recommend attending to learn more about the process of maximising employee incentive programs.
"In the last one to two years there has been an explosion in the amount of incentive programs being launched, and a lot of this comes down to the easy access to off-the-shelf online products that make it easy to set up a program," Arnott says.
"It's important to find the right technology solution that will make it easy for employees and channel partners to participate, redeem rewards, and so on, and the upcoming Incentive Show will have a lot on display for anyone interested in learning more."
Organised by Wakamo Business Media and endorsed by the Incentive Marketing Association Australia, the Incentive Show will help attendees access and understand the latest trends in the fast-moving incentive and motivation markets, hear case studies from top practitioners and network with the industry's leading experts.
The show will be held at the Sydney Convention & Exhibition Centre at Darling Harbour, Sydney on Tuesday 29 September and Wednesday 30 September 2009.
For more information visit www.incentiveshow.com.au.