Designing Effective Employee Incentive Programs

by: Nichole Gunn July 6, 2011

The expression ‘the grass is greener on the other side’ is now finding its way into the business world. With the economy making a comeback, companies are beginning to lift hiring limitations and freezes. This is great news for employees, especially highly skilled workers: competitors will be offering incentives for them to jump ship. On the flip-side, this is bad news for business owners: top talent may decide to take the more attractive offer and leave for greener pastures. To combat this potential top talent exodus, businesses are designing bigger and better employee incentive programs (monetary and non-monetary) to keep their employees happy and in place.

Business Finance magazine suggests CFOs work along with the HR and finance departments to guarantee the highest ROI in regard to the implementation and success of rewards programs. This is of particular importance for designing performance metrics and proposing benefit funds transfer focusing on identified workforce needs.

North America leader for Towers Watson Laurie Bienstock told the magazine, “It is becoming more important for companies to consider how they can reward and retain their critical employees."

Prioritizing is essential when deciding the potential connected with employee benefits, including salary and rewards programs. Which programs or plans to fund, and how much, must be considered carefully.

Incentive programs come in a variety of shapes and sizes, such as:

  • Merit-pay budgets
  • Non-monetary rewards, such as gift certificates and gift cards
  • Ongoing incentives, such as pizza Fridays or early Friday let-out
  • One-time rewards, such as a flat screen TV for reaching a goal
  • Travel incentives
  • Trophies or Certificates of Recognition

As with most things, there is not a one-size-fits-all reward program that will work for every company. Research must be done to determine the specific requirements and expectations a particular company will need for its program to succeed. One company may be focusing on safety goals, while another is aiming at bottom-line results.

Focusing in on a particular worker group or team is another strategy that can be used to boost the ROI. People have different likes and dislikes, the same holds true with employee groups. Finding the incentives that will be most effective for a particular group of workers will help ensure the programs success. Companies may also generalize the incentives based on the particular field; designers of software may appreciate programs based on product development.

Another strategy that can have a positive impact on employee motivation and performance is enhancing the workplace environment. Creating a pleasant working environment, offering work-at-home incentives, or allowing flexible work hours are incentives that will boost employee morale.

It is important though to realize that an effective reward program should recognize top workers for their successes. Bienstock notes that while, “everyone should have the same opportunity, but that does not mean everybody should get the same pay out."

In a Society for Human Resource Management survey it was found that rewards and incentives, as a form of recognition from management, proved to be “very important” to employees, as cited by 52 percent of the respondents.


About Nichole Gunn