by Rajesh Bihani

Ever wonder why employee performance drops upon incentive distribution? Spoiler alert- it’s not the performance to blame but the incentive structure.

Monetary Incentives are Counterproductive

Incentives in the form of cash, bonuses, or gift cards excite employees and encourage performance-based competition. But does this last? How can a $500 gift card to Costco encourage an employee to continually invest in their own performance? It can’t.

The greatest asset of any business is its human capital. Incentives are so often misused as a pat on the back for achieved results instead of a long-term investment into an employee.

Temporary compliance in order to receive a monetary incentive often results in a dip in performance making some employers question how an employee did so well the previous quarter causing employers to repeat the same incentive mistakes. Constantly having to dangle a dollar to be chased will put a strain on the employer-employee relationship.

Fight the compulsion to make employees prove themselves. Coercion and fear can destroy motivation and may even encourage defiance.

Psychologically speaking, this may result in a lack of trust in one another’s skill set. Other work relationships may also become casualties of rewards, as those who aren’t receiving monetary incentives feel punished and may experience undue stress that will affect their performance. Productive incentives encourage long-term commitment to the company’s mission and an employee’s consistent contribution and demonstrative potential. To be clear, long-term incentives ≠ long-term commitment. In fact, long-term incentives can make a bad workplace problem, worse.

Incentives Should Support Organizational Goals

You may say “we ask employees what incentives they want”. Responses can vary and be situational. As a leader, your team looks to you to know what’s best for them and the company. It’s important to shift the thinking around incentives away from reward to investment. And what do all investors want? That’s right, a good, consistent return.

A common mistake among incentive plans is that they are geared toward an individual’s performance. We know now this is temporary and only demonstrates what someone was hired to do instead of teaching them how to do it better. In the U.S., an average of $90 billion was spent on incentives in 2015. Some of this is a total loss in the form of ineffective incentivizing. Companies paid for rewards, not results.

Employees Want Incentives More Valuable than Money

Harvard Business School did a survey to discover what the average employee values most in their job, perhaps to your surprise, money, on average was listed as fourth or fifth among most valuable aspects. Meanwhile, skill building and a positive work culture were among the top three reasons employees were consistently fulfilled by their work.

Use incentives as an opportunity to skill build, not peak performance.

Team-Based Incentives

The root of incentives reflects a desired business goal. For sustainable success, goals set for employees should have lasting results.

Incentives that include all team members produce sustainable high-performance due to the creation of accountability. Instead of recognizing an individual, group collaboration builds a workplace culture based on accountability and reliability. Team-based incentives foster creativity and healthy risk-taking, promotes a wider sense of ownership, encourages conflict resolution, and builds trust. A collaboration brings a mix of talents, perspectives, and skills. There’s no secret that this kind of work can produce high-functioning systems that generating impactful ideas. The results of the team’s incentive-driven effort are invaluable returns to the business and the employees.

Tool-Based Incentives

Every year there are developments in technology and software that is designed to make our jobs easier. Whether you are an engineer or in pharmaceutical sales, organizational (among other) tools become seemingly necessary to do the job as efficiently as possible.

Tool-based incentives are a way to provide team members the ability to perform optimally, reduce stress, work efficiently, and overachieve. This is a win-win. My first job as a cashier when was 16 left me working weekends with a partially functioning POS system. It was frustrating having to wait three minutes to process a transaction. I approached my boss with a proposition. Buy me a new cash register. In exchange, I would push the monthly promotional out items till we were sold out. I did my sales thing, my boss got a new POS, and I could now perform my job stress-free, and the store can make more money. It’s no surprise I became manager 2 years later. This is a tiny example of a tool-based incentive.

Some employees need better equipment, operating systems, or even task-managing programs so that they can achieve more in their position. At peoplehr.com they do exactly that, a tool like People automates HR processes and makes a noticeable difference, the benefits of which are experienced company-wide. The key to making tool-based incentives is the freedom for an employee to choose what it is they need. This helps employees focus more on engagement, not performance.

Provide Training

The launch of an incentive program should mean the beginning of a training plan. If you are working a performance improvement by incentive strategy there must be an angle of education and feedback to create lasting results. Use an incentive plan as an opportunity to address downfalls in performance as opposed to peaks. The saying “you’re only as strong as your weakest link” has stuck around for a reason.

Provide Feedback Post Incentive

In order for an incentive program to create lasting results, there must be post-incentive feedback. Explaining to teams exactly why they achieved success, what they did optimally, and how they can continue to improve.

Feedback is also the time to use the teams achieved results to create systems that perpetuate these results and better.

Feedback is a two-way street and the perfect opportunity to create a dialog from employee to employer. During an incentive period, people work the hardest. Team members would learn quickly what they need from their leader and for their space in order to achieve more. Be all ears.

Turning incentive into a learning opportunity reinvests into the business in the form of skill-building, tool-providing, training, and feedback. Bonuses and gift cards can be motivating and will generate increased performance.

But for lasting organizational goals, these incentive theories serve well.

Photo: Pexels

How do you incentivize your employees? Let us know in the comments below!

For more content about motivating your employees:

• Four practical ways to keep employees motivated in a family-run business
• How to create a company culture that motivates employees
• Podcast: Moving motivators in Japan, Management 3.0 debut episode
• What HR managers can do to increase employee motivation
• How to motivate employees without any carrots or sticks