July 1, 2019

How to create an employee incentive program

An effective employee incentive program can motivate your employees so that they reach their potential and, in the process, so does your business. But getting to that point can be easier said than done. In this article, we show you four steps to create an employee incentive scheme that engages your staff, lifts performance and helps drive business reach.

Incentive tip 1: Start with your business goals

The foundation for any employee incentive scheme should always be your business goals. But unlike most strategy which involves looking at the far horizon, here what matters is your near-term financial goals – the ones you want to achieve in three, six or 12 months. That because, ultimately, it’s hitting these that will provide the funding for your incentive scheme. While that may sound obvious, starting with what you want to achieve is something that’s often overlooked when employers sit down to work out how they’ll compensate staff.

Incentive tip 2: Involve your employees

Once you know how much to spend, it’s time to involve your employees. After all, employee incentive schemes almost always work best when they’re collaborative rather than being handed down from on high. Employees almost always achieve more when they have some sense of ownership. For your incentive scheme, this should be done on two levels:

  • As a group: As a team, you should be communicating your business targets and working out together how to achieve them. What do your team members realistically think they can achieve collectively? And what do they think is possible if the team fires on all cylinders?
  • Individually: What contribution does each team member believe they can contribute to achieving those goals?

By aligning this with your own objectives from one above, you’ll now have the basis for your incentive scheme.

Incentive tip 3: Set targets

That means it’s now time to set both individual and group targets. When you do, make sure they’re concrete. That means, as much as possible, connecting them to revenue. It also means connecting them to something tangible in this regard rather than subjective.

When you’re coming up with targets, make sure they’re challenging ones. If you plan to incentivise people by asking them only to achieve what they’ve achieved so far, that’s what you’ll generally get – no or limited improvement. The whole point of an incentive scheme is to have people lift their productivity and thereby lift the business. But at the same time, targets shouldn’t be impossible. Setting a target no one can achieve is likely to have a demoralising impact on staff, not an inspiring one. Once your targets are written down, you should also work out a timeframe for achieving them.

Incentive tip 4: Set rewards

Now that you know exactly what you want people and your group to achieve, work out how they’ll be compensated. For most businesses, a sliding scale often works best because, the greater your profits, the more you’ll be able to share among employees. What I mean by this is that, say for instance your goal is to hit $50,000 in revenue and, after paying staff that leaves $5,000 profit, of which the business keeps $3,500 and you share $1,500 among staff. If you were to hit $60,000 in sales and your costs stayed the same, you’d have $15,000 profit, so you could easily provide a greater percentage to staff while still retaining a far greater profit for the company.

You’ll also need to work out when to pay rewards. Studies show that employees often respond best when they see their rewards paid regularly, rather than in one hit. Although, this may not always be possible.

Finally, think outside of cash payments too. It’s not just money that incentivises employees (although this should be a part of it). You could also think about things such as extra leave, a group dinner or event, or other non-cash incentives.

Ready to incentivise?

If you’d like to know how to build an effective employee incentive plan in your organisation get in touch with the Catalina Consultants team today.

say hi to our author

Merilyn founded Catalina Consultants in 2012 on the belief that all organisations, regardless of size, should have access to top quality bespoke HR services. She enjoys working closely with her clients and believes that the best results are built on relationships of rapport, trust and authenticity. Growing up, Merilyn had her sight set on stardom and dreamed of becoming an actor. She also sang and played the piano, but ended up studying accounting and HR. Whilst she hasn’t won her Grammy just yet, she still loves a good karaoke night. Merilyn loves to travel with her family, with South Africa being one of her most memorable destinations.

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