Motivate employees with incentives.

• Author: Townley, Brian
• Position: Employee rewards program

AN INCENTIVE PLAN REWARDS NONMANAGE-MENT EMPLOYEES whose performance leads to short-term and/or long-term company success kand growth. A plan like this shows gratitude to employees and conveys a spirit of ownership in the company's success that a paycheck alone can't communicate. An incentive plan unites employees and steers them in the direction the company wants them to go. They will respond by giving that extra edge a company needs to compete.

A 2007 study by Towers Perrin reveals that only 21 percent of employees are fully engaged with 38 percent being partly or fully disengaged. Imagine if every one of a company's employees were totally tuned in, using all of their talents and directing their best energy toward their goals.

According to an article in the Harvard Business Review in 2000, of six leadership styles studied, an employee rewards program was the strongest predictor of organizational "climate." Rewards in turn correlated directly with financial results, the article said. Simply stated, when motivating employees, the company is gaining customers and growing profits.

Frederick Reichheld, author of "The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value," says that American companies, on average, lose half their employees every four years and half their customers in five years. That means employee attrition may impact customer loyalty more than most business leaders account for. Western Michigan University did a study that showed that any incentive plan, regardless of its structure, is better than none at all. One study showed that performance did not differ significantly whether the amount to be earned as an incentive was 3 percent or 100 percent of total pay.

Bonus and incentive plans can be invaluable to employees who want to know what they need to do to succeed in a company. They allow for a good way to get noticed, and thus be successful at a company no matter where an employee "ranks."

It's more than just putting a lot of money on a table and saying, "Come and get it."

Recognition vs. Incentive

Recognition programs focus on work already accomplished, while incentive programs inspire and motivate work not yet complete. Many companies have recognition programs in place, but more are tied to an employee's tenure, not necessarily performance.

A company may give an employee a coffee mug after five years of service or a gold watch after 25. Those are great things, and we do something like that too. However, we do this with no expectations of wanting or needing something in return. It's a gift.

We've turned what were known as annual "employee recognition programs" on their head to implement more useful and more lucrative employee incentive programs.

The reason incentive plans are so important is because it's impossible for employees to see the "big picture" when it comes to their...