Sun, Oct

Incentives to change

Phil Thompson, head of BPIF Business, looks at the best ways to get the best out of your staff.

As both competition and consolidation increase, organisations are focusing on employee contribution, motivation and behaviour, which will in turn have a significant impact on competitive advantage and business success.

The relationship between reward and motivation is complex, with the concept of team-based rewards often being seen as more powerful than individual rewards. Incentive schemes contain the measurements that the business really values and the role and motivation of management is pivotal if the staff incentive schemes are  to be successful.

Many commentators suggest that it is the perception   of both the equity and attractiveness of rewards that influences motivation. In looking at company strategy,   the greatest barriers are often blamed on lack of training, ineffective communication and the lack of an appropriate culture.

In addition, some argue that recognition in itself is a more powerful influence on behaviour than reward. For example, a recent CBI report found that only 45% of those surveyed rated material rewards as among the main factors in building and sustaining employee satisfaction, compared with 57% who rated ‘interesting work’ and 68% who rated ‘establishing good working relationships’ as important factors.

Current practice indicates that organisations should not rely just on financial incentive schemes alone to deliver the desired behaviour. Rather, incentives should form part of an integrated and strategic approach to reward. Effort is more likely to be exerted throughout the scheme if the financial rewards are mixed with recognition from managers and if staff are involved in the design of the scheme.

  •  Incentive schemes will benefit from wide-ranging business input. For instance, operations, sales support and training need to be involved with the creation, maintenance and refreshment of incentive schemes. In addition, planners need to align incentive scheme objectives with the overall corporate performance management process and reflect the scheme's key performance indicators in managers' contracts.
  •  Incentive schemes need clear objectives aligned with overall corporate objectives. These need to be communicated to all participants, perhaps through a balanced scorecard for the scheme, showing sales, costs and other metrics in an easily accessible format.
  •  It is essential that an organisation pilots any scheme to explore unintended consequences (such as managerial and staff fraud) and focuses on the operational mechanics (such as the delivery of communications, recording processes and the tax position of rewards).
  •  The team element should be encouraged in the scheme. Reflecting the ‘team’ focus and the balance between individual and team reward is a key strategic issue for incentive design.
  •  Organisations need to take account of corporate culture and, in particular, the reputation and past use of incentives within the organisation.
  • Successful incentive schemes should form part of an integrated and strategic approach to reward. The effects of the scheme need to be measured and compared with pre-agreed success criteria. The right behaviours as well as outcomes within the incentive scheme need to be rewarded - flexibility and product knowledge are as valuable as sales.
  • Communication is pivotal to the success of the scheme and directed at the staff who have succeeded under the scheme. The style of communication needs to be simple and aimed at improving the staff comprehension of the scheme. Communication is critical in the initial briefing about the scheme to staff and in providing timely and accessible information about performance.

Incentives cannot be considered as just black-and-white, successes or failures. It is an impossible task to satisfy all stakeholders in a scheme as a result, the major challenge that will face management will be to devise appropriate schemes for the circumstances of their business and should take into account not just ‘hard’ commercial results but also ‘soft’ wins such as improved morale and teamwork.


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