How to motivate the troops
Getting the most out of employees for the least
by Rob Stonehewer
June 10, 1996 - Strategy Magazine
Special Report: Premiums & Incentives

It doesn't matter what size budget a company has for an employee incentive program: the same principles invariably apply when it comes to achieving your objectives. The following are some rules of thumb that can help ensure a program produces the biggest bang for the buck.

Establishing objectives:
The first step is to define the program objectives, which must reflect both the corporate strategy as well as current market conditions. It's a good idea to identify all the challenges and then rank them in order of priority, so that you end up with one primary and several secondary objectives.

In a sales incentive program, the objectives may include increasing sales, improving market share, enhancing product knowledge, generating new accounts or enhancing customer loyalty. In a non-sales program, on the other hand, they may include improving quality, maximizing productivity, enhancing customer service, fostering teamwork or reducing absenteeism.

In all cases, the objectives must be simple, specific, attainable, well timed, measurable and acceptable.

When setting targets, don't try to come up with one quota for all; look instead at what's possible on an individual basis. You want employees competing against themselves in an effort to improve their own performance over last year, not competing against their peers.

A smart approach is to ask employees what they think they can achieve, and then design goals that will drive not only the top 20%, but also the middle 60%.

Determining the budget:
A well-structured incentive program will more than pay for itself through the profits or cost-savings that it generates. To cover the costs, most companies allocate 5-10% of incremental sales, or 1% of total sales.

The awards offered generally represent more than three-quarters of the overall program budget, with the remainder allocated to program communications, administration and training. For sales or dealer programs, the value of the awards should be 2-5% of the participant's income. For non-sales programs, it may drop as low as 1%.

Selecting the award:
Awards should reflect both the recipients' efforts and the quality of their performances, as well as demonstrate the importance of their achievements. They should also help fulfil dreams and aspirations and have a high-perceived lasting value.

The shorter the program, the higher the relative value of the awards; similarly the more experienced the audience, the more sophisticated the award offerings.

A few other points to bear in mind:

1) Travel is the ultimate reward.
Group incentive travel is often used to recognize high achievers in sales or dealer programs. However, it is relatively costly, involves considerable planning and removes all the top performers from the office at the same time. Individual travel makes an effective alternative; it is less expensive and easier to deliver.

Winners like it because they can go where they choose, when they choose and with whom they choose. On the other hand, you lose the opportunity that group travel presents to build loyalty and share ideas.

2) Offer a choice of awards.
Merchandise runs a close second to travel as an award choice. The range of options available, in terms of both style and price, means an incentive planner can find something to reward all levels and types of achievement.

Merchandise is also promotable and helps reinforce past achievements as well as establish goals for the future.

Cash may be used as an award, but it lacks the same kind of lasting value. It normally goes to pay bills, its perceived value is exactly what it's worth and most people feel uncomfortable bragging about it.

With a merchandise incentive, it is important to offer a choice of awards, use brand names, leverage spousal involvement, select awards targeted to your demographic and look for awards that have image and lasting appeal.

One other rule of thumb for planners: don't assume that just because you like golf, everyone else in the program feels the same way.

A program may offer a plateau selection of awards, which helps drive participants to reach higher levels. Extra effort will be achieved even if they fall short of their goal.

A new alternative award system uses credit or debit cards, allowing participants to earn points redeemable for travel or merchandise at specific retail stores. Although this increases the selection available and enables the winner to take advantage of special promotions, the downside is that the award equates to cash, which has no added perceived value. It also lacks promotional excitement, offers no award exclusivity and no opportunity for an award presentation in front of peers. A further disadvantage of the credit card system is that you may be seen as encouraging your program participants to go into debt.

3) Peer approval is a major motivating force.
In addition to travel and merchandise, recognition awards can be used, such as pins, plaques, certificates, privileged parking space, a column with a photograph in a company newspaper or even a T-shirt.

Probably the most effective of these, however, is a personal letter of appreciation and a public thank-you from the company president.

Program communications:
Communications should fire the imagination, stimulate the senses and appeal to the emotions.

When choosing a theme, remember that it should be short, simple, convey excitement, and reflect your company image. It should also be capable of sustained promotion, generate action, reflect the awards available and specify the program objectives. All incentive programs also need effective, ongoing promotions to focus attention, generate action, sustain involvement and acknowledge achievement.

Launch materials should promote what participants have to do, how they can do it and what they can win.

In addition, it's a good idea to hold a kick-off meeting or party, use 3-D teasers, standing mailers, training quizzes (to help participants achieve their goals and avoid "energized incompetence") and end-of-program congratulations or condolences letters.

Performance measurement:
Providing feedback on performance is critical to the success of an incentive program. Most participants want to know how they are doing each month with respect to their own objectives and in comparison to the top performers. In addition, you might provide information on their performance versus last year, the number of points earned to date and how many they will need to earn the award of their choice.

Any system must be fair, easy to understand, quantifiable and provide a clear gauge for measuring each participants or team performance.

Evaluating results:
Once the awards have been won and the glamour has faded, you have to ask whether the program achieved your objectives, and find out how participants feel about the structure of the program, promotion, rules, awards and the measurement system.

In evaluating the results of the program, keep in mind that outside influences such as advertising, pricing, promotions and competitor activity can also affect the outcome.

A final word:
Regardless of the type of incentive program, a successful planner follows the same basic rules. Clearly communicate measurable objectives that are attainable within a defined time-line. Offer awards that are motivating for the specific audience. Communicate results on a regular basis and celebrate achievements. Above all, keep it simple and build upon it for the future. If it's well designed, an employee incentive program will prove a cost-effective marketing tool that delivers results.

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