The Risk of No Rewards
Remember "old school" work incentives? "If you do a good job…you get to keep it!"
In this challenging economy, many managers are tempted to revert to similar thought processes, believing that their (remaining) employees are "just happy to have a job." But in reality, this is exactly the time that employees need reassurance and motivational leadership.
After massive layoffs, it's particularly difficult to keep employees productive—let alone engaged. They're wondering if there's a next wave of reductions coming; they're worried about the viability of the company itself; they're looking for a sign that their contribution is still necessary and valued.
Putting programs that motivate and engage employees on the back burner is not only a mistake, but it will also be costly in the long run.
Employee motivation, satisfaction and engagement are directly linked to customer satisfaction, loyalty and engagement—all of which are directly linked to profitability. So companies that continue to reward, recognize and engage employees and customers—especially in an economic downturn—consistently outperform their competitors who do not. In fact, a Fortune magazine study of stock performance of the "100 Best Companies to Work For" between 1998 and 2005 found that companies with engaged employees returned 14 percent per year on each dollar invested, while the overall market return was only 6 percent per year.
En-gage'-ment has been defined by the Incentive Performance Center as:an emotional connection between an employee and his or her job or employer, between a company and its channel partners or between a company and its customers.
Engaged employees understand their value to the organization and put extra effort into their work, going beyond the minimum that is required. They accept the goals of the company as their own and wholeheartedly commit to achieving them.
Engaged customers are advocates of the brand, recommend it to others and often provide valuable feedback for new product and service development.
According to a 2008 study by the Gallup organization:
- 54 percent of U.S. employees are not engaged.
- 17 percent are actively disengaged.
- 29 percent are engaged.
Disengaged employees are the group that will be leaving their current positions for greener pastures as soon as the job market recovers. This is an expensive problem for American businesses and shareholders, estimated by the Human Capital Institute to total more than $300 billion.
An effective engagement strategy includes these steps:
- Set meaningful objectives and expectations. Setting goals with the target audience is important so that all are in agreement that the goals may be aggressive but achievable.
- Develop a clear measurement system. Measuring performance against objectives over time is critical to tracking progress and results. Such measurement should be the basis for incentives or rewards that are included in the engagement effort.
- Provide necessary tools and resources. Make sure that the target audience has the skills, information and training necessary to achieve the objectives.
- Reward and reinforce desired behaviors. Catch your group doing something right and reinforce it. This is where a defined incentive program can go a long way toward ensuring that the audience stays focused and engaged.
While incentive programs have always been an effective strategy for achieving specific goals, they can play a critical role in a larger engagement initiative. Savvy companies turn to incentives (especially in challenging economic times) for five key reasons:
- Incentive programs offer high potential reward with low risk; low fixed costs and the variable costs are driven by performance. As a general rule, administrative costs should be approximately 20 percent of your incentive budget. In a properly structured program, 80 percent of the cost of your program is only incurred when the goals have been met. No performance equals no payout
- Incentive programs target specific audiences, product lines, behaviors, selling timeframes, etc. You can structure a program such that each individual, group or audience has a specific goal to meet.
- Structured correctly, incentive programs can easily measure progress, goals and behaviors. While sales incentive programs are often thought to be the easiest to measure (incremental sales over the same period last year; sales volume increase by territory or account, etc.), an incentive program makes sense anywhere that behaviors or activities can be measured.
- Incentive programs are flexible. Once the goal and audience are defined, you are able to adapt to changing conditions by tweaking the program accordingly. If you find that a particular behavior is yielding high results, you can incorporate bonus points for that behavior even in the middle of your program. This is very difficult to do with other marketing strategies such as advertising or direct mail.
- Incentive programs yield both short- and long-term results. While many effective incentive programs are short in duration, they provide residual value since the behaviors rewarded and reinforced during the promotion have long-standing value to the organization. This is one of the reasons why organizations that promote and reward positive behaviors outperform their competitors.
A study of Incentives, Motivation and Workplace Performance: Research and Best Practices from the Incentive Federation (www.theirf.org) found that individual incentives can result in an average 27 percent improvement in performance while team incentives improved performance up to 45 percent. As an incentive professional, you can assess your situation and help to design a program that will accomplish your goals. The Incentive Marketing Association portal (www.incentivemarketing.org) lists various experts along with contact information. Additional resources are available through The Forum for Performance Management and Measurement (www.performanceforum.org).
If you ever worked for a company that didn't appreciate or acknowledge your efforts and results, you don't need to know the current buzzword to realize that you were not "engaged."
Successful companies have always known that recognizing, rewarding and appreciating employees keeps them engaged and motivated and taking better care of customers. The difference is that today it's more than a theory or simple common sense: it's documented and measurably linked to an organization's financial performance.
Maybe today's economic challenges and threats to a company's profitability are what it takes to get attention for the power of incentives in the quest for employee engagement.
Source: Premium Incentive Products Magazine. Barb Hendrickson
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