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The Value of Incentives

Cash and non-cash rewards can help retain and engage employees, but creating a culture that values their input and empowers their work may be even more effective. It's also important to address the issue of incentivization on an individual, rather than group, basis, according to recent research.

Wednesday, April 18, 2012
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What incentives and rewards most motivate workers to do their best? If employers had a single definitive answer, life would be a lot easier in HR departments everywhere.

The latest answer is "individualization, according to 2012 Trends in Rewards and Recognition by St. Louis-based Incentive Research Foundation, which analyzed existing research, scanned incentive industry and business publications, and sought input from industry leaders.

Aspects of that trend include:

* Personalization: Increased use of gift cards and award elements that allow employees to do their own "discounted" shopping during the redemption process.

* Participation: For example, non-cash incentive programs that can increase wellness participation by 26 percent to 90 percent, returning more than $3 for every $1 invested.

* Convenience: Integrating mobile applications into all phases of incentive-program communications to keep employees connected 24/7.

In addition, IRF's findings offered a dozen trends, including:

* 'Fast HR': IRF says its most significant observation is the unprecedented rate of change that will pave the way for more flexible approaches and faster responses to employee management. Reward-and-recognition programs have a key role in this so-called Fast HR because they can be quickly recalibrated to meet employee needs faster and with greater ease and precision than conventional compensation structures.

* Gamification: Incorporating the principles of game design into the structure of reward-and-recognition programs and meetings.

* Internal Marketers: New research has confirmed that individual actions and attitudes play a significant role in maintaining the value of the brand.

* Time to Repair Cultures: Deep cost-cutting during the earliest days of the recession along with reduced resources moving forward has damaged the cooperative nature of some workplaces. With up to nearly three-quarters of the workforce open to considering new jobs, organizations need to recapture the cultural conditions that promoted retention of skilled employees.

* Virtual Workplaces: More than three-quarters of businesses use some form of social networking to connect their workers, so they need to ensure all technology-based reward-and-recognition programs are integrated into social-media sites.

David Gebler, founder and president of the Skout Group, a Sharon, Mass., firm that advises global organizations on values-based ethics and cultural risk management, says he has really never seen this type of report before -- in that it blends micro, macro and cause-and-effect factors into the same research. 

But, he notes, based on his experience, the most important trend cited in IFR's research is pinpointing the "growing acceptance of non-cash compensation" for incentive and recognition purposes.

"That has to come first. Then you can look at other vehicles and programs," says Gebler, author of The 3 Power Values: How Commitment, Integrity, and Transparency Clear the Roadblocks to Performance.

"When employees seek recognition or appreciation, they are more in need of personal acknowledgment that they exist, rather than receiving a gift card," he says.

He adds that many employers take the easy way out by hiring a benefits consultant, instead of looking at the intrinsic motivators that generate deeper employee engagement and commitment.  

On balance, Gebler says the IRF report is "interesting," with some valuable insights.

He would focus, however, on those aspects of incentivization that relate to the more profound aspects of corporate/employee culture: Treating employees like grownups who have families of their own -- which they are -- rather than treating them like children by emphasizing games and similar incentive programs.

Other prime ways to incent employees, he says, include giving employees responsibilities to shape their future; demonstrating that management is transparent, committed and has integrity; and clearing roadblocks to performance and then getting out of their way so employees can shine.

Also important is letting employees define what job satisfaction is -- and then enabling them to achieve it, Gebler says.  

"A gift card can be great as part of a broader framework, but not if you are doing things wrong on a fundamental level," he says, adding that, when he asks employees what they feel are the essential factors in a high-performance organization, they usually cite employee recognition as a critical value.

"In many cases, they just want their managers to say, 'Good morning,' 'Thank you' and 'I really appreciate the job you are doing,' " he says.

"If you have a happy workforce, there is no need to spend a fortune," he says. "It is all about the values of inclusion and making people feel valued. ... You need to understand what makes your people tick and be conscious about that."

Holly Kortright, senior vice president of human resources at Deltek, a Herndon, Va., provider of enterprise software and information solutions for government contractors and professional-services firms, says that "as the economy picks up, employers are more concerned about retaining top talent, so incentive activity is picking up. We're experiencing that very issue."

First and foremost, she says, organizations need a culture that attracts and retains people, mainly through valuing the workforce and offering challenges within an open, collaborative culture.

Deltek recently emerged from a massive cultural transformation -- transforming from a family-owned company to being acquired by a private-equity group. As a result, the company had to undergo change to support global growth. (Deltek has 1,600 employees in 10 global locations.)

In using incentive programs, Kortright says, the company's focus is on using employee-appreciation events and other ways that support workers and impart a "feeling that they belong."

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As part of that, Deltek is enhancing and encouraging more travel now to emphasize collaboration among its often dispersed and virtual workforce, she says. It also is highly focused on using social networking and mobile devices to encourage more togetherness.

Deltek also seeks to incent employees through skills and career development, including a massive mentoring program it calls "protege program," on-demand training and other employee-development initiatives.

"Enabling them to be successful is a great incentive program," Kortright says. "It is really critical, having them engaged. People will pick their heads up and look for other jobs unless they feel engaged, and have somewhere to go within the company."

That's not to say, however, that the company eschews financial incentives. It does offer quarterly bonuses that are driven by company goals, she says.

"When it comes to incentives, we're a down-to-earth company," Kortright says. "Employees will see right through things if incentives ring hollow, and are not aligned with strategy."

New York City-based Loree Griffith, a principal in Mercer's human capital practice, says many of the trends found by IFR align with her firm's global employee survey, What's Working 2010-2011, which is based on interviews of more than 30,000 workers in 17 countries.

"The rules have changed," Griffith says. "Now it is more about pay for performance, very low or no bonuses, and layoffs results from so much M&A activity. We're in an environment where the employer-employee relationship has changed, and employees are asking, what is in it for them, to help them be engaged and treated equitably."

In response, employers have increased their use of the non-cash incentives, turning towards work/life programs, formalizing career paths, increasing special-project opportunities, and opening up lines of communications to make workers more aware of how their contributions affect company performance.

"As the economy picks up, when you look at things as strategies coming out of the recession, there will be a renewed focus on money, but I believe employers have learned to keep non-cash things on the radar," she says. "Engagement: That is the key focus here, make sure employees are valued."

Susan Heathfield, an HR consultant at her own firm in the Detroit area, who also writes about HR for About.com, says she sees employers continuing to focus on benefits aimed at convincing top talent to stay and make them happy.

In her company, that means creating a work environment of empowerment, so employees can make impactful decisions.

"That means they are not sitting in a cubicle and doing work," Heathfield says. "We encourage them to spend time with their manager, to have a meaningful interaction about their needs and career-growth opportunities. If you can train managers to do that, it will be more rewarding than anything you can buy with money."

It doesn't cost much, she says, to provide social events, such bowling parties and tickets to Detroit Tigers baseball games, to provide incentives that will work.

"There is value in them, and while that value is hard to measure, it incentivizes them to stay and be productive," she says, adding that she also encourages the use of social media among employees.

"Anything you do that builds relationships among employees, and between employers and employees, is positive," she adds.

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