Within the last few weeks, a blog titled "10 Myths About Employee Incentive Programs" has circulated around the blogosphere and Twitter fairly quickly. Many people in our industry are already aware of the article, first seen on www.wisebread.com and then more recently posted on the AMEX-Open forum (where it was seen by most people). Several responses from the industry have already surfaced, including a good blog post from Paul Hebert.
There were a couple of decent ideas raised in the "10 Myths" article, though we'd argue that most of the points made in the article were off the mark. The following will address some of the points made in the article and our comments.
"One of the biggest reasons companies use employee incentive programs is to boost morale...Typically morale is low for reasons like bad management."
We agree that bad management can lead to poor morale. However, an issue as large as bad management cannot be fixed simply by implementing an incentive program. Well managed companies where morale is good tend to generate a "flywheel" type momentum where incentives can enhance and generate even more positives. This positive effect of incentive programs has been well documented in many cases.
"From a worker's point of view, they're asked to do more and work harder."
Incentive programs are designed to achieve specific goals. Those goals don't always require an increased workload - in fact, the goals are typically geared to focus on working smarter, looking for ways to use resources more effectively and improving productivity.
"You're not doing this for your employees. You're doing this for yourself. It is a purely selfish deed."
Well-designed incentive programs are designed to be mutually beneficial to both the company and employees. The employee feels valued and motivated and therefore is more productive and committed. The company, in turn, reaps the benefits of motivated, focused and loyal employees. The company realizes improvements and at the same time employees are rewarded.
"Ask workers if they have suggestions."
It is a good idea to listen to your workforce. As the front line, they best understand their jobs and can identify areas where changes and improvements might be able to be made. Not every idea can be implemented or will work, but knowing the door is open for suggestions (and the possibility of an award if their suggestion is implemented) will give employees a sense of ownership.
"Providing all the resources necessary..."
Giving your workforce the resources necessary to perform their job is the first step to achieving company goals. This concept goes beyond providing employees with proper office equipment. It also includes a shared knowledge of the company's goals and what is expected of each employee to help achieve these goals. Sharing this knowledge is a display of good management. With good management, incentive programs become the catalyst that improves productivity (as already stated earlier).
"When you use the metrics to reward an outcome, you often shift your workers' focus from the big picture to a small part of it. Instead of doing their work better, they do a very specific and particular part of it better."
There is no real evidence to back this up. Check out Paul Hebert's response to this in his Friday Rant. He does a great job addressing this statement.
It should also be noted that most of the grievances against incentive programs within the "10 Myths" article are based on cash-based reward programs. The author does mention that non-cash rewards offer benefits but that "...nothing compares to getting cold, hard, cash..." Studies have shown that cash rewards are typically viewed as compensation, thus do not offer the trophy value that non-cash incentives provide, making them less effective. The trophy value continuum concept will be further discussed in a future posting.
Incentive programs are, when implemented properly, proven to be very effective. However, they are not a magic wand to reach all company goals. Good management and employee intrinsic motivators are also important to boosting overall business. Incentive programs should also help provide better communication and teamwork amongst employees. At Hinda we do "practice what we preach" and have our own employee incentive program in place. It was launched with the support of our senior management team, but is managed by a team of employees representing all areas. The program has been very successful and works quite effectively. Everyone in the company is involved and nearly every department in the company has at least one goal to achieve in meeting the monthly and quarterly metrics that are measured. When points are awarded they are based on company achievement - we all win together and support each other. The company wins through improved productivity and higher engagement of employees.
After reading the "10 Myths" article and other follow up responses, what do you think?