Two things that every manager, leader, and HR admin thinks about on a regular basis are employee motivation and employee engagement. These two bastions of the employee experience are vital to the health and productivity of your organization. After all, businesses with a high number of engaged and motivated employees are 21% more profitable and 17% more productive.
What if we told you that there was one wholesome and effective way to increase both motivation and engagement in a wholesome, effective way? It’s true! The key is to use an employee incentive program.
But you'll only get real results if your incentives are set up and managed just right. You don’t want to dangle a proverbial carrot over your employees or force obedience in any way. Good incentives are meant to spark great work ethic with awesome rewards.
So what exactly are incentives? What are the best practices for implementing them? What are good incentive ideas? Get the answers to all these questions and more in this guide to creating an effective employee incentive program for the modern workplace.
What Are Employee Incentives?
Incentives are rewards or prizes of some kind that are directly tied to a measurable action or accomplishment.
Incentives are rewards or prizes of some kind that are directly tied to a measurable action or accomplishment. There’s a dictionary definition for you. But to clarify what that means exactly, it’s actually easiest to look at what incentives aren’t.
Incentives are not employee recognition. Recognition is great for showing appreciation for an action after the action has been done. Incentives need to be set up beforehand as motivators for an action.
Incentives are also not celebrations. Service awards, birthday gifts, and holiday bonuses shouldn’t be considered incentives because they’re usually given regardless of performance (yes, typical bonuses don’t count as incentives—we’ll go over this in more detail farther down).
To create an incentive, the company has to:
- Decide which action or behavior it wants to see
- Set a goal that will drive that behavior
- Establish a reward for accomplishing that goal
- Clearly communicate this program to the relevant employees
Why Are Well-Designed Employee Incentives Important?
Incentives can be great ways to show appreciation for employees who go above and beyond in certain aspects of work life, and if you’re careful in your implementation, they can have a host of great benefits:
- Employees feel more fulfilled. When employees are rewarded immediately after completing tasks, and when these incentive rewards are frequent, employees are more motivated and interested in their work
- Employees are more engaged. Rewarding employees for their hard work makes them more engaged in their day-to-day activities.
- Business recruitment and retention increases. When employees are incentivized and rewarded for their best work, the desirability of your business as a place to work increases for both current employees and future prospects.
- Productivity and sales increase. Sales incentives are one of the most popular types of incentives, and these are designed to bring in more money. However, with well-designed incentives for the entire company, all employees—not just salespeople—will be motivated to boost their productivity, netting the company more profits.
- Teamwork and collaboration abound. Some incentives create competition, and while those can be fun in small doses, the best incentives encourage teamwork and collaboration within teams, departments, and the company as a whole. And when everyone is working together, a culture of cooperation is born.
- Company values are developed. When you tie your incentives in with your company values—by rewarding those who develop or embody those values in their work—you can create the culture and spread the attitude you want for your organization.
Put simply, good incentives help motivate your employees to achieve their goals and embody company values, all while boosting productivity and profit. One of the best things you can do for your workforce is to reward them for their efforts, and incentives are the perfect way to do that in a fair and quantifiable way.
Good incentives are ones every employee can attain, no matter the work they do. A range of possibilities are open to you when choosing employee incentives. Let’s talk about how you can set up employee incentive programs in the most effective way possible.
Employee Incentive Programs
Employee incentive programs for small, midsize, and large businesses are the programs companies use to incentivize employee actions. These programs should include time frames, any necessary rules, and specific goals or behaviors you want employees to reach for. You should also specify what the prize or reward is for those who reach the goal.
What Is an Employee Incentive Program?
Employee incentive programs are simply the programs that you use to incentivize employee actions.
Incentive programs can offer financial or non-monetary rewards. Creativity in your programs and rewards is more important than cost—remember, you want to boost morale and motivation by rewarding your employees for their good behavior and hard work. As long as the reward does that effectively, it doesn’t necessarily need to be cash.
Potential Pitfalls (and Solutions) of Employee Incentive Programs
An incentive program is a powerful tool that needs careful handling. Let’s dive into 10 common pitfalls businesses encounter when implementing employee incentive programs and solutions to maximize the impact of your program.
1. Misaligned Incentives
- Pitfall: Misaligned incentives can be a real head-scratcher. Employees might be working hard, but if they're focused on the wrong things, it doesn't help the company and they don't feel rewarded.
- Solution: Ensure all incentives are closely tied to the company’s strategic goals. Don’t forget to regularly review and adjust the incentive criteria to align with evolving business objectives and desired outcomes.
2. Short-Term Focus
- Pitfall: Incentive programs focusing on instant results can be a recipe for trouble. They can encourage employees to prioritize immediate gains over long-term success, undermining sustainable growth and development.
- Solution: Strike a good balance between short-term and long-term incentives. Incorporate rewards that recognize both immediate achievements and sustained performance over time to encourage employees to focus on the big picture.
3. Unintended Consequences
- Pitfall: When team members get fixated on the prize, this might inadvertently promote unethical behavior or cutting of corners to achieve targets. They can also promote unhealthy competition.
- Solution: Implement ethical guidelines and conduct regular training to reinforce the importance of achieving targets fairly. This may involve honesty, transparency, and adherence to company policy. Monitor for any adverse behaviors and adjust the program as necessary.
4. Equity and Fairness Issues
- Pitfall: No one likes a rigged game. If incentive programs are perceived as unfair or biased, they can lead to resentment and decreased morale among employees who feel overlooked or undervalued.
- Solution: Make sure everyone knows how to win! The best incentive programs have clear and fair rules (think objective criteria) that everyone understands. Communicate them openly and regularly so there’s no guessing about how to earn those rewards. Involve employees in the design process to ensure fairness from the get-go.
5. Complexity and Management Burden
- Pitfall: Overly complex incentive programs can be a recipe for confusion and low impact. They can also impose a significant administrative burden on HR departments.
- Solution: Keep it simple. Use technology and automated systems to track and manage incentive metrics, reducing the administrative burden and minimizing errors.
6. Inconsistent Application
- Pitfall: If the incentive program feels inconsistently applied (some people get rewarded for things others don’t), this can cause a big mess of hurt feelings and mistrust.
- Solution: To make sure everyone has a fair shot at incentives, standardize the program across the whole company and train managers and supervisors on its proper implementation to ensure consistency.
7. Dependency on Incentives
- Pitfall: If the only reason employees work hard is for the rewards, they might lose intrinsic motivation to do a good job. You want everyone to be motivated by the work itself, not just the shiny trophies at the end.
- Solution: Foster a culture of intrinsic motivation by recognizing and rewarding behaviors that align with the company's mission and values. Use incentives to supplement other motivational strategies, such as career development opportunities and meaningful work.
8. Cost Implications
- Pitfall: Incentive programs can get costly to implement and maintain. If not managed properly, the costs may outweigh the benefits, especially if the incentives do not lead to significant improvements in performance.
- Solution: Regularly evaluate the cost-effectiveness of the incentive program. Focus on non-monetary rewards and recognition, which can be highly effective and less costly. You want to ensure you’re investing your money in rewards that truly boost performance and engagement.
9. Negative Impact on Collaboration
- Pitfall: Individual incentives can sometimes foster competition rather than collaboration. This can pose a risk of damaging teamwork and cooperative efforts.
- Solution: Team members should be high-fiving each other, not sending passive-aggressive vibes. Design team-based incentives to encourage collaboration and teamwork. Recognize and reward collective achievements like wins earned in a team project—less “me” and more “we.”
10. Diminishing Returns
- Pitfall: Over time, the impact of incentives may diminish as employees come to expect them as part of their regular compensation.
- Solution: Diversify the types of incentives you offer to keep them fresh and engaging. Rotate rewards and introduce new recognition methods to maintain employee interest and motivation. Regularly solicit feedback from employees on what types of incentives they value most. Listening to feedback is vital to creating a program that benefits all.
How to Create Effective Incentive Programs
Let’s look at some dos and don’ts of incentive programs. After all, you want to incentivize employees to do their best, push their boundaries, and accomplish great things. However, what you definitely don’t want is to encourage temporary compliance and behaviors, or alienate employees who may not be able to hit the same numbers or reach the same level of productivity as other employees.
An effective employee incentive program fosters the behaviors you want and encourages employees to create lasting improvements in their work ethics by providing incentives they feel invested in.
Here are some things to keep in mind when creating an incentive program for your company.
Do Set Clear Expectations
Imagine sitting down to play a brand-new board game, one that everyone has been talking about, only to realize that the instruction manual is missing (pretend Google and YouTube don’t exist for this hypothetical example). That same frustration is what incentives with unclear expectations create for employees.
Clearly define the rewards you’re offering and how employees can earn those rewards. That direct relationship between effort and outcome will make your employee incentive program that much more powerful. Plus, with a direct and specific relationship between the desired behavior you want to incentivize and the goals you want to accomplish, you’re more likely to bring about the desired change.
This is why end-of-year bonuses shouldn’t be your incentive program. It’s hard to tie these bonuses to specific, measurable achievements, so many employees don’t know what to do to get larger amounts. Additionally employees who feel entitled to a bonus just for doing their normal work may be upset or unsatisfied if they don’t get a bonus or if the amount isn’t what they wanted. Avoid that ambiguity with specific, measurable incentives.
Do Offer Different Incentive Programs
As we mentioned, sales incentives can be powerful tools—for sales teams. But what about marketing, HR, customer support, and engineering? These and other teams deserve the opportunity to push their boundaries and strive for excellence—and they deserve to be rewarded for their hard work.
Other incentive ideas that everyone can participate in include:
- Consecutive days without missing work. Give out prizes to those employees who are consistently at work doing their best. (However, make sure to encourage time off and work/life balance as well—it’s a narrow line to walk, we know.)
- Referral programs. Reward employees who go out of their way to refer their friends and family to work for the company. As long as you’ve built a healthy, rewarding culture (with awesome incentives), many employees will naturally want to invite their loved ones to join the fun. Make it even more enticing with a referral program!
- Health and wellness programs. You can incentivize your employees to stay fit and healthy by rewarding them for their wellness efforts. Offer on-site health screenings, gym memberships, or wellness classes, and then reward employees who take advantage of them. Healthier employees mean fewer sick days and lower absenteeism.
- Sales incentives. If your company has a sales team, you know those employees are the foundation of most of the income you generate. Incentivize them by rewarding those who hit goals, with additional rewards for those who exceed goals. While not everyone can participate in these incentives, it’s important to at least ensure everyone on the sales team has a chance to participate.
- Safety programs. Safety should always be a priority, especially in more physical jobs. Encourage greater safety training for your teams by incentivizing courses and certifications to improve safety knowledge and skills.
- Continued education. Around 92% of employees think professional development is an important part of their job. Encourage professional growth by providing continued education and incentivizing participation.
- Support team satisfaction ratings. Client success and support teams are fielding questions and client concerns all day every day, and most teams have a rating system to let them know how they’re doing. Incentivize good customer interactions by creating a support team satisfaction rating program that rewards those who go above and beyond.
Ensure that every employee has the chance to take part in your incentives. You can also include incentives for individual performance, team performance, department performance, and company performance. These types of varied incentives are sure to reach the maximum number of employees.
Don’t Offer the Same Reward for Other Programs
Say you create an incentive that offers event tickets for those who achieve it. Tickets to a concert, festival, or theme park would be awesome, right? But what happens if you offer that as a reward for five-year service anniversaries as well? Are employees going to be incentivized to strive for that reward? Probably not. They may just wait for their five year mark.
Make sure that whatever you offer as incentives is unique and desirable for your teams. Employees need to want the reward, and they need to know exactly what they have to do to earn it.
Don’t Give One-Size-Fits-All Rewards
This is huge. An incentive needs to include a reward that people want badly enough to work for it. But if only 50% of your workforce is even remotely interested in the Peloton exercise bike you’re offering, you’ll only have half the results you’re aiming for. Offer options for your employees to pick from if they reach their goals.
If creating a catalog of rewards isn’t feasible, at least reach out to your employees through surveys to see which rewards are the most popular. The last thing you want is to put time and money into implementing an incentive only to find that no one cares.
Awardco offers millions of reward options through Amazon so that each employee can choose the reward that’s most meaningful to them. After all, most of us would be more motivated to work for the headphones on our Amazon wishlist than for the company-branded sweatshirt option.
The Top 4 Types of Employee Incentive Rewards
You know what incentives are, why they can be beneficial, and how to create the best kinds of incentives for your company. But what rewards will get your employees jumping out of their ergonomic office chairs? What can you offer that will create the most excitement and drive the best behavioral improvements?
We’ve broken down some great options into four different categories. Take a look below to see what stands out the most to you.
Types of Employee Incentive Rewards
1. Professional Development
2. Experiences
3. Gifts
4. Work/Life Balance Services
Professional Development
A surprising 58% of employees say they would be likely to leave a company that didn’t offer skills training and development. And 87% of Millennials, one of the largest portions of working Americans, say professional development and career growth are very important to them.
Incentives can provide employees with awesome opportunites for career development and boost your organization’s productivity. Some ideas for incentives and rewards include:
- Offering classes and seminars on various subjects and skills
- Sponsoring employee memberships to professional organizations
- Paying for employees to attend various conferences
- Offering lunch-and-learn and skill-sharing opportunities
- Providing a library of relevant reading material and offering a cash reward each time an employee reads one of the books
Experiences
Tangible gifts and cash are great, but creating memories is one of the greatest gifts you can give. As much as that sounds like a Hallmark card, it’s true! Here are some ideas you can offer to get your employees out of the office (or out of the house):
- Reimburse recreational activities such as trips to a National Park or a skiing trip.
- Treat your top achieving employees to dinner at a local restaurant.
- Pay for employees to learn something new, such as a cooking class, an exercise class, music lessons, or an art class.
- Offer tickets to events or attractions such as a sports game, a concert, a museum, or the zoo (remember that not everyone will like the same event—offer various options to please as many people as possible).
- Give employees an extra day of PTO. Or, better yet, offer an all-expense-paid vacation! Local Airbnb options can give employees a nice break without breaking your budget.
Experiences are a great way to incentivize hard work at your company because they’re exciting and can hold great worth for your employees. Plus, the employees who earn these rewards will come back refreshed, so you lower the risk of burnout. It’s a win-win!
Gifts
With gifts, the sky's the limit. We’ve already created a whole guide dedicated to giving employees gifts, so we won’t beat this dead horse too much. The most important thing to know, once again, is that gifts should be something your employees actually want. Here are some general ideas to get the inspiration for your own employee incentive program flowing:
- A year of a subscription, whether that’s Netflix or Book of the Month for better work/life balance or Spotify Premium to allow employees to really focus while in the office.
- Gift cards are always a good option.
- Cash toward a team budget—once the team has earned enough through incentives, the whole team gets to do something fun with it.
- Clothing or accessories (both branded AND unbranded—branded swag is not something every employee will want).
- Care packages so that remote workers can get in on the fun.
Don’t settle for run-of-the-mill gifts that won’t get people excited. Find out what really lights a fire under your employees and offer gifts that fit the bill.
Work/Life Balance Services
Last, but not least, you can offer services as a reward. Employees have a life outside of work, and even the best incentive in the world isn’t going to make them forget about the stresses they face in their everyday lives. So why not offer to alleviate some of that stress with an incentive reward? Here are some ideas:
- A house cleaning service that employees can earn every month.
- A vehicle-centric reward, possibly including free washes and detailing, gas reimbursement, oil changes, or tire replacement.
- Meal delivery kits sent to employees’ homes to take the stress out of eating healthy.
- Meeting with a financial advisor to take some of the stress out of finances
You have all sorts of ways to incentivize and motivate your workforce to give their best efforts. The key is to consistently offer rewards that employees actually want.
Other Employee Incentive Considerations
There are a couple of things we haven't mentioned yet. First, remote employees deserve effective incentives just as much as anyone else. If you have remote teams or even if your entire company is remote, providing clear, easy-to-understand incentives is even more important than ever. Tailor rewards to fit the people who don’t come into the office, and make sure to clearly advertise each incentive as often as you can so that everyone hears about it and knows how to participate.
The last consideration we want to mention is budget. Some of the rewards listed above may sound pricey, but you don’t need to worry too much about that! Not all incentives need to be in the form of extra cash added to an employee’s paycheck. Things like swag or extra PTO are still great rewards, and their cost is minimal.
Try out our employee recognition budget calculator.
Measuring the Impact of Your Employee Incentive Program
So, how do you know if your program is actually working? After all, you need to be able to calculate your ROI to know if your investment is worth it.
Measuring the impact of your employee incentive plan requires establishing the right KPIs. These may involve financial and non-financial metrics.
To measure the financial impact of your incentive program, you might consider:
- Sales: Analyze the shift in sales created by your incentive program. Evaluate sales numbers before and after implementing the program.
- Revenue: How is your revenue looking? With the help of your sales data, you can use that to track how your incentives contribute to the organization’s overall performance.
- Cost savings: You can assess the cost savings your company has achieved via decreased absenteeism, reduced turnover, better workflow processes, and more.
Measuring the non-financial impact of your incentive program may include metrics like:
- Engagement: Measure how the incentive program influences motivation, job satisfaction, and loyalty. You can do this by circulating surveys (e.g., net promoter score) or measuring absenteeism.
- Performance: What results define success for your team? Think output, quality, efficiency, and so on. Compare performance before and after the implementation of your incentives.
Don’t worry—all this analysis doesn’t mean you have to wrestle with hundreds of programs. Awardco plays nicely with all the software you already use to manage your team. We streamline things so recognizing awesome work becomes a breeze and fits right into your daily routine.
Learn about Awardco integrations
Success Stories: Businesses That Have Successfully Leveraged Incentives
Getting started with a new company program can feel daunting. We hope these real-life examples offer the direction and inspiration you need to craft the best employee incentive program for your business.
BPM: Using Incentives to Build a Culture of Recognition
Awardco helped BPM create a variety of incentive programs with an exceptionally high recognition rate, driving engagement and fueling excitement about its company culture.
- 34 recognition programs
- 98% of users recognized
“We use recognition as a tool to motivate and encourage our employees—everyone knows Awardco because we actively use it for any and all incentives for employees.”
Monica Delgado, Senior Manager of Total Rewards & Wellbeing at BPM
Aptive Gains Insights into Its Incentive Spend
Taking advantage of Awardco’s reporting capabilities helped Aptive better understand and manage its incentive budgets and improve the effectiveness of its recognition program.
- 100% visibility into incentive budgets
- 10× more recognitions at highest-performing branches
“With Awardco, we now have more visibility into our incentive budgets than ever and can be more judicious about our incentive spend.”
Lacy Andersen, Project Manager at Aptive
Use Awardco to Maximize Your Incentives
You don’t need to spend all your time and effort on creating and implementing an employee incentive program. With Awardco, you can easily tie recognition, incentives, rewards, and budgets together into one platform. Our automation options and partnership with Amazon Business ensure you’ll be able to handle any and every incentive you can come up with.