Incentives—The What, When, and How
Small businesses have plenty of options for employee incentive programs. Of course, gigantic year-end bonuses such as what investment bankers receive, or stock options, which have fueled the growth of the tech industry, are out of reach for most emerging businesses. However, the basic principle is the same: To provide additional rewards, above and beyond basic salary and benefits, which incent employees to work harder to achieve your company’s goals.
What Are Incentives?
Morale may be an even more important factor at an emerging business than it is at large corporations. Your employees know that signing on to a start-up venture is risky, so in addition to sweat equity from you and other shareholders (if any) you need to cultivate spirit equity in your workforce.
Effective incentives include plaques, trophies, t-shirts and hats that feature your company’s logo. These items can be customized for each individual’s achievement. Other perks involve granting special privileges at work: a convenient parking space, the ability to work from home, an extra paid vacation day or casual dress opportunity. More costly incentives include paid travel packages and gift cards.
Depending on what type of business you’re in, awards can be granted in connection with a health and wellness program, for groups maintaining an excellent safety record, or for peer recognition.
When Do You Award Them?
The traditional occasion for celebrating employee performance was retirement. You’d think that would have been too late to do much good, in terms of that employee’s performance. However, if keeping valuable employees for the long term is your goal, that kind of retirement recognition will make an impression on younger workers.
More frequent awards include employee of month, employee of the year, and recognition for each employee on the anniversary of their hire date. Spontaneous recognition can also generate good results when an employee comes up with an innovative idea or a group meets its sales or production target.
In general, experts say that longer-term incentives—for example, a year as opposed to a month—are more effective in improving productivity. That’s because longer programs do a better job of reinforcing your company’s core goals and values.
How Do You Manage an Incentives Program?
Choosing and implementing an effective incentive program will probably require a bit of thought and research. You’ll need to identify the specific problems you’re trying to correct, or the goals you’re trying to reach. Then you’ll match those objectives with the personality of your workforce.
That shouldn’t be too difficult given all of the choices available. Of course your budget is an important factor. It’s also important to consider the trade-offs between individual and group awards. If you can’t afford to give out company stock, programs that reward groups are probably the only way to encourage employees to “think like an owner.” On the other hand, experts say that employees tend to respond better to individual incentives.