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Therefore, I want to give you a section on the following key elements of a successful employee incentive program:
- The successful initial implementation of incentive schemes.
- The sustained, ongoing success of incentive schemes.
I am not an expert on incentive programs, but fortunately, I had the privilege to work alongside such an expert for a couple of years.
Mike Honnet of Mike Honnet Consulting has more than 30 years experience with incentive programs, so I asked him to share his experience on this site.
So over to you Mike...
Thanks Derik. To start, I would like to sketch two scenarios:
Scenario 1: One organization decides to implement an incentive scheme. The program seizes the imagination of all employees. They quickly find out about the organization’s business, its priorities and how they personally can make a difference...and then they do!
Teams experiment with new work methods; production costs per unit plummet, quality shoots up, on-line delivery goals are met consistently and stock levels fall.
At the end of the first year, it is clear that the employee incentive program has triggered a revolution. It has yielded a payout per participant in excess of 30% of their annual packages and an operating profit increase for the organization of 25%. It looks as though this trend will continue, with further performance records being smashed in the future.
Scenario 2: Another organization also decides to implement an incentive scheme. There is a surge of interest from participants. And then it all comes unstuck. Staffing levels and head-count increase, quality falls and stock levels increase significantly.
At the end of the first year, the scheme is adjudged a dismal failure and it is consequently shelved.
What fascinates us is what causes such enormous differences in the outcomes experienced by organizations implementing incentive schemes.
Like Derik has mentioned, this article, based on many years of practical experience, identifies and explains the following key elements of a successful employee incentive program:
- The successful initial implementation of incentive schemes.
- The sustained, ongoing success of incentive schemes.
In doing so, it also provides a framework for organizations to evaluate the effectiveness and sustainability of their own incentive schemes.
Key Elements for Successful Initial Implementation
The most important key elements for successful implementation of incentive schemes are the following:
- Vision
- Innovation and Risk Taking
- Fixed Duration
- Decentralized Design
- Separation from Base Pay
Key Elements for Sustained Success
The most important key elements for the sustained success of incentives schemes are the following:
- Flexibility
- Multiple Measures
- Monitoring and Evaluation
- Simplification
- Celebration of Success
If you adhere to these guidelines, your incentive scheme will have a significantly improved probability of triggering a real and sustainable improvement in the performance of your business.
In conclusion, remember...
- You will never fully optimize your organization’s performance without an incentive scheme...but just having one does not, in itself, guarantee improved performance.
- The design of a really successful incentive scheme is an ongoing process. Not an event.
- The success of an employee incentive program design in another organization is not a predictor of its success in your organization. Don’t try to “transplant” other peoples’ scheme designs.
- Nothing fails like success! Hanging on to design features or performance measures just because they brought success in the past, does not increase your chances of success now. On the contrary, it could kill your employee incentive program.
If you would like assistance in making work rewarding for your people, or to discuss topics raised in this article, please contact Mike via his website at www.mikehonnet.com
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Return from Employee Incentive Program to Sustainable Employee Motivation
