How can I offer the right incentive?

The economy may not be in recession technically, but equity markets are struggling, employment is rising and many sectors are reporting difficult trading conditions, not least, retail, banking, and house building.

Such conditions are bound to impact on any current or planned incentivisation programmes leading to companies evaluating whether such plans are cost-effective and justifiable during a recession.

Classically, such evaluation asks: is the initiative properly aligned with the financial and non-financial elements of the business strategy; how are the objectives and targets established; do the objectives place too much emphasis on short-term targets at the expense of long-term growth/ However, in a recession, the issues essentially boils down to one of cost.

Taking a positive line
Whilst it’s always easy to cut any scheme, taking a positive line can be just what’s needed when morale is sagging.

What is called for is a change in both the nature of the rewards and objectives to reflect the circumstances, needless to say, any company that wants to compete want to keep its employees happy and motivated.

Alternative incentives that do not involve the high-reward costs that are linked to performance can include:

• Flexible working time
• Extra leave
• Club memberships
• Free drinks
• Special events or away days
• Additional opportunities, such as training or access to different roles.  

Indeed, such incentives differ from pure cash for objective schemes in that they tend to encourage changes in behavior and attitude rather than directly drive improvements in performance.

Measurement
Does implementing an incentive scheme that doesn’t drive performance so much as encourage behaviour change mean that it can’t be measured effectively?  In other words, can it deliver a clear ROI and does it need to?

Incentives such as days off, flexible working or away days have a cost, of course, and can be measured against the benefits that changes in behaviour bring; such as saving waste, reducing postage costs, cutting use of unnecessary lighting and heating etc.

Likewise, when the changes in behavior sought are directly customer facing it can have a very direct and measurable impact on sales, enquiries and return purchases for example.

However negligible the costs and indirect the benefits, any such schemes can be measured objectively from the starting point.

So, even when the incentives are used to improve morale or workplace satisfaction, such efforts still affect a company’s bottom line somewhere, however subtly.

Planning a tougher incentive scheme
There’s no doubt that a more controlled performance related scheme, is more easily quantifiable in terms of risk.

Here the rewards increase significantly when team or departmental budgets are met and when sales targets are achieved. These schemes reduce risk because they are ‘self-funding’ and directly measurable.

Trips abroad are a very obvious way of rewarding departments or teams, and in some ways more affordable for a company than pure cash rewards, as deals can be done on away-day trips.

For this reason, it’s tempting to merely concentrate the incentive scheme purely on the sales function rather encompassing the whole company. However, whilst this is the norm (and almost expected) during boom times, in a recession it may be necessary to motivate all employees – or at least give them all the feeling that they are pulling together.

Much research points to the fact that employee satisfaction has a direct correlation with customer satisfaction (and a positive impact on the bottom line)

What’s gone before
Your company’s incentivisation programme will probably come down to company culture: what is expected, what has been done before and what has worked. It takes a very confident and progressive company to try something new (especially in a recession) and, of course, it is ultimately easier to dismiss a behviour-change incentive scheme where the impact on revenue is not so easy to discern.

As a final thought, rewarding customer service or creating an Employer of the Month may not seem as motivating as direct rewards, but it is worth noting that cash incentives are not always readily appreciated either. Very often, employees begin to compare and look around to see if their rewards are as good as those being offered by compensation (think investment banking). It may be that if your incentive scheme lacks something in comparison to others that it becomes a disincentive.

Undoubtedly, carefully constructed incentive programmes have a role to play in cultural and behavioural change. It really needs to ask  the question “what does my company really want to achieve”, rather than “what do we need to do to keep people happy”?