5 Pitfalls To Avoid With Employee Incentives
Is your business looking to improve on employee morale, performance and output — and, ultimately, create a happier workplace? An updated incentives/rewards program could be the answer. Incentives can help motivate your employees to reach performance goals and ensure commitment, loyalty, and retention. Just a mere 5% increase in employee retention can result in a 25-85% boost in profits.
However, misguided incentive plans can not only be ineffective, but actually harmful to businesses. An employee who feels unappreciated or unrecognized won’t work to improve and may start looking elsewhere for other opportunities. Disengaged workers cost the economy $300 billion or more per year, while organizations with higher than average levels of employee engagement realized 27% higher profits, 50% higher sales, 50% higher customer loyalty levels, and 38% above-average productivity.
To get the most out of their employees, businesses need to work to create opportunities for them to succeed, and reward them when they do.
Here are five pitfalls to avoid when creating an employee incentive plan:
1. Offering Only Money
When business owners think of reward systems, they typically put compensation at the top of the list, and indeed, it is important. However, money is not the be-all and end-all. Offering only monetary compensation may lead employees to only work for financial gains. You might want to include some type of longer-term rewards for all-star individuals in your company. Most employees are motivated by monetary compensation plus vacation days, event tickets, charitable donations, and, perhaps most importantly, the respect and recognition of their peers and superiors.
2. Too Much Competition
While workplace competitions amongst employee can lead to an increase in performance, if things get too competitive, the “losers” may feel unhappy or disconnected from the environment. Employees should not be rewarded at the expense of their coworkers; rather, rewards should be delivered in a way that all employees are happy about the result. It should be a team-building exercise, not a way to put an individual on a pedestal.
3. Ineffective or Disingenuous Praise
Acknowledging an employee’s excellent performance via message or discussion can be the difference between a happy, motivated employee and someone who feels unappreciated. That being said, generic, inconsequential, and trite feedback, like “hard worker,” “team player,” or “dynamic”, should be avoided at all costs–employees will see through it and be insulted at the soullessness of the recognition. Instead, an employer should recognize specific actions and results. However, the recognition doesn’t necessarily have to be something extravagant; often the simplest expressions work the best, like a personal note or a public statement of thanks in front of the employee’s team.
Timing is also a big one. It is important that an employee is recognised as soon as possible for their hard work. Getting a quick, one-sentence thank you at the end of the month during a monthly meeting will hardly motivate an employee.
4. Only Certain Employees Are Rewarded
Don’t forget about the little guy! Sometimes, companies only heap praise upon workers who directly impact financial aspects of the company and forget to recognise or reward other hard-working employees in different sectors of the organization. A good group of managers makes sure to recognize and reward ALL great performances and ALL employees who represent the core values of the company.
5. Benefits Aren’t Beneficial
Companies that provide lacklustre and below industry-standard benefits will quickly find themselves losing their existing employees and having trouble attracting future employees. People will talk to others in the industry. Make sure that the benefits you provide–whether health, financial, or otherwise–doesn’t make your employee feel stupid for being loyal to you.
Take a hard look at your current incentive program. Remember, it can mean the difference between your business’ success and its failure. Need help coming up with some new rewards? Click here for some great incentives ideas.