One of the first workplace casualties of a recession is often the staff incentive scheme. But, says incentives expert the Grass Roots Group, companies are now realising that cancelling rewards and bonus programmes to save money is a false economy.
Itโs a temptation for companies to see an incentive scheme as a luxury, something that could be easily shed as belts are tightened during an economic downturn, according to Grass Roots. But itโs clear from the speed with which firms are reintroducing schemes โ or even starting them for the first time โ that as the economy recovers theyโve been recognised as vital performance drivers, as well as key ways to retain staff at a time when wage rises may be out of the question.
Studies suggest that reward budgets were initially slashed as the recent credit crunch hit home. But sales slumps soon taught company bosses the error of their ways and they quickly began reallocating money earmarked for areas such as advertising to re-launch in-house incentive programmes.
Return on investment
A study conducted by the International Society of Performance Improvement called “Incentives, Motivation and Workplace Performanceโ indicates that companies were wise to reinstate schemes. Effectively designed and well-implemented incentive programmes increase performance by an average of 22%, the study shows. Team incentives can boost performance by an impressive 44%.
Participants become more engaged in their jobs, with an initial 15% increase in performance, climbing to 27% when theyโre asked to persist toward a goal to gain a promised reward. When staff are incentivised to “think smarter” about a given task, their performance increases by an average of 26%.
Anyone still wondering whether budget allocated to incentive programmes was money well spent only needs to look at the studyโs analysis of return on investment for programmes. It discovered that 88% to 95% of all incentive programmes reach or exceed their goals, with a 134% ROI for sale staff and an even more noteworthy 200% ROI for non-sales employees.
Numerous studies have shown that incentives and recognition rewards create a more engaged workforce. Gallup research, based on surveys with millions of employees globally, proves that this positive engagement results in 27% higher profits, 50% higher sales, 50% higher customer loyalty and 38% above average productivity.
But incentive schemes are not just about the bottom line. With budgets still desperately tight in many companies, thereโs often little prospect of big salary rises. Retaining staff is becoming a challenge when salary increases are not available as a tool, so a workplace incentive can be a powerful, cost-effective way of retaining important members of a team.
Employee retention
More than 18% of staff in the UK choose to change jobs annually, and with the average cost in terms of recruitment and loss of productivity between ยฃ8,000 and ยฃ12,000 per employee, more and more companies are seeing the costs of an incentive scheme as a no-brainer. As Dr Bob Nelson Phd, an author and expert in employee retention, says: โPeople may take a job for more money, but they often leave it for more recognition.โ
However, while a slick, effective reward scheme may send performance levels soaring, a badly designed incentive programme can damage staff happiness and unity. One former company department head, who asked not to be named, still shudders when he remembers his DIY attempt to introduce a monthly cash bonus for his under-performing team. โI did it on the hoof one Friday, thinking that it would be a fun way to introduce a small competitive element,โ he says. โIt was only a small amount of cash and I genuinely didnโt think it would be a big deal.
โBut I was too vague about the rules and it spiralled out of control with accusations of unfairness putting several team members at each otherโs throats. It took me months to deal with all of the fall out and petty resentments.โ
Incentive schemes are no place for the ad hoc amateur. Companies have to think through every element and beware of the rule of unintended consequences. A common concern is that the use of incentive programmes will create an atmosphere of destructive competition within a company. Certainly, itโs true that having a poorly structured, badly communicated programme will do just that, causing all sorts of chaos and ill feeling among staff. Itโs better not to do it at all than to do it and get it terribly wrong. Still, an appropriately designed rewards programme will have an emphasis on very steady improvement in the performance of employees, not just raw competition.
Approval schemes
These days, incentive programmes are considerably more sophisticated than the crude โhereโs a big wodge of cashโ approach originally used to motivate sales teams. Peer-to-peer approval schemes are proving increasingly popular. Staff members are asked to nominate the colleague they think has contributed most in terms of behaviour likely to further the aims and ethos of the company. The person with the most votes gets the reward. Usually something like a nice Mont Blanc pen rather than cash, because non-cash awards are more effective in changing long-term behaviour.
Many firms find that multi-store vouchers such as Grass Rootโs Bonus Bond โ accepted at Argos, Debenhams and Halfords โ are seen as a better reward than money by staff. It encourages people to buy something special that they remember rather than spend the cash on that weekโs grocery shopping, according to the company.
Online games
Peer-to-peer has the added advantage of building team unity. It encourages staff to think positively about each other. Itโs hard to think negatively about your colleagues when you discover theyโve been telling the boss how good you are at your job.
With cash often seen as counter-productive, companies such as British Gas have introduced risk-based online games to incentivise staff. Everyone from engineers to call centre staff can earn credits for clearly designated types of positive behaviour at work, which they can then use to buy online scratch cards and win prizes such as iPods and shopping vouchers.
These types of scheme clearly work well, as one call centre agent at another company that launched an online points-based holiday draw incentive scheme explained. โThe anticipation was fantastic. I was one sale away from a gold medal one Saturday,โ she says. โI waited on a whole hour extra to ensure my name was in the draw to be considered as a winner for the holiday. I loved it. It really pushed me.โ
Grass Roots survey
Current statistics suggest that your competitors will be jumping on the incentive bandwagon very soon. In a Grass Roots survey of 800 known incentive buyers, 92% of respondents agreed or strongly agreed that incentives are a good way of gaining competitive advantage within their industry by creating a point of difference. In the same survey, 63% of respondents agreed or strongly agreed that their organisation will introduce incentives to drive performance soon and a further 61% agreed or strongly agreed that incentivisation is the way forward.
