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Eyes on the prize: Getting incentive schemes right

Recent research by the Chartered Institute of Personnel and Development (CIPD) has revealed that the vast majority of employers are risking money and the happiness of staff by not assessing the impact of their reward practices. Catherine Forrest, Business Incentives Manager, House of Fraser, offers some advice to ensure your incentive scheme is motivational.

Motivation is the key to any successful people management role. If people can be encouraged or developed in such ways as to improve their effectiveness, then business can and will improve. Motivated workers are more productive, and higher productivity usually means higher profits. But how many employees ever reach their full potential? Almost all of us have the opportunity to perform better, but most of us need some motivation.

Personnel incentive schemes carry a number of benefits, such as encouraging higher levels of staff performance, with rewards related to the achievement of goals or targets. Such incentive schemes can help in persuading staff to join a business, to increase motivation and loyalty, and may be a major factor in retaining existing staff. But incentive schemes can also be instrumental in boosting productivity, building teamwork and helping employees focus on achieving targets.

Any incentives offered must be relevant to the jobs to which they relate, and affordable enough to fit in with a company’s business strategy. It is also fair to say that any incentives work best when they are linked with a good pay structure, favourable working conditions and good management practices, such as regular skills training, appraisals and the tools to do the job.

Tailored and targeted

A number of incentive scheme options exist, each with different costs. Examples include:
• commission
• bonuses
• share option schemes
• vouchers
• formal awards
• lifestyle incentives such as time off for children’s school events
• company cars
• extra holidays or sabbaticals after a long period of service.

Before devising any sort of incentive scheme, companies should profile the target audience in order to ensure that a relevant and, above all, motivational reward is presented. There’s no point in offering a holiday reward to someone who hates flying, or presenting a case of champagne to someone whose religious or personal beliefs preclude them from drinking alcohol. By factoring in the participant’s age, gender, marital status, religion and interests, decisions can be made on the type of incentive that will appeal, thus ensuring a really motivational reward.

There’s no point in offering a holiday reward to someone who hates flying, or presenting a case of champagne to someone whose religious or personal beliefs preclude them from drinking alcohol

Before embarking on the scheme, it’s important to identify the programme’s objectives, which can then be set out and measured through careful research. Such objectives might include recruiting, or retaining staff; it may be that the structure of the organisation needs to change, or simply that new financial targets are to be set. Involvement of senior personnel is instrumental in driving forward any scheme – this will help to ensure that the scheme is workable from an operational point of view and will aid in deciding on the most suitable incentives and any training that is required.

The scheme should be linked to a company’s financial targets and remuneration. This will help determine whether the incentive offered should be financial or nonfinancial, and also how the scheme might be administered. The scheme also needs to be competitive in terms of tax implications – it’s a turn off for staff if their reward incurs a large tax bill.

Communicated clearly

An incentive programme must be easy to understand, and good communication using posters, newsletters etc will help facilitate this. A lack of good communication can cause complaints from participants, so anyone involved in the scheme will need to know what’s required, how they do it, and what the rewards are. But there are other considerations when actually setting up an incentive scheme:
• Brief personnel at the beginning, and document how the scheme will work so that misunderstandings can be avoided.
• Personnel will need regular updates on their progress, and this is where communication comes into its own in conveying every detail and avoiding misunderstandings.
• Invest some of the budget in communication materials.
• Create a buzz around the programme and launch the scheme with as much ceremony as budgets permit.
• Consider devising a theme for the scheme to make it fun.
• Communicate regularly using more than one medium – perhaps a special newsletter, regular email updates, communicating via the company’s intranet, monthly meetings etc.
• Ensure that part of the communication strategy highlights just what the incentive entails – whether that is a holiday, gift vouchers or an experience adventure. Also, convey what the incentive doesn’t include – for example, if it’s a holiday, then the recipient may need to factor in some spending money.

Planned to perfection

• Decide on measures for staff such as performance targets or quality of work. Measure performance via sales and revenue reports, output record sheets and customer service feedback forms.
• Run a pilot scheme and evaluate the results.
• Top achievers should be recognised, as this helps build the scheme’s momentum, and participants’ enthusiasm – and we all love a public pat on the back. Recognition for a job well done, and being rewarded above basic pay for an extra effort is what can make employees give their best.
• Try and have lots of winners, as this will in itself help motivation – people will feel that they have a better chance of being one of 25 winners than of winning just one prize.
• Make awards frequently and regularly in order to sustain the momentum. Present these awards with style and enthusiasm.
Catherine Forrest • Consider having a ‘most improved’ reward, as well as an ‘employee of the month’. Then, at the year end, put all the monthly winners together, and award an ‘employee of the year’ who will be given a major prize. This will also help to encourage sustained effort.
• Hold regular reviews, and obtain feedback. Document all comments, and if something isn’t working, change it.
• Be flexible, but don’t make false promises and start something that can’t be finished.
• Elect a project leader to coordinate activity and to answer queries.
• Finally, align your incentive scheme to your business plan in terms of possible improvements in customer service, increase in production etc.

Reviewed regularly

Having set up the incentive programme, it’s important to check that the scheme is working, and this can be achieved by setting up a system that records objectives and goals. Regular meetings and dialogue with personnel will maintain an ongoing review of the incentive(s) offered, and will provide feedback on whether these incentives are valued by participants in the scheme.

Achieving motivation among the workforce is about understanding how employees think and feel, giving them belief in themselves, boosting their confidence and improving their work/life balance. A good incentive scheme can and does help employees achieve their best.

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