With Incentives, it starts with: “why would you do one in the first place?” We all like to win, we all like to feel appreciated for the effort we put forward, and we all like to be rewarded. It’s called the “dopamine effect” — the rush we get when something good happens to us. You might ask, “Can’t I just pay people more to do what they are supposed to do?” If only it was that easy. The reality is it’s complicated, but there are ways to make it easy.
With incentives, we are really trying to create excitement and focus on specific objectives for a limited period of time, to inspire people to change behaviour or perform at a higher level. And ultimately drive your strategies and deliver targeted results. There are a few rules of thumb:
Incentives should have a defined objective and purpose that everyone can understand. They should align with business strategies and goals. They should be designed to achieve a specific result, drive focus, establish priorities, and motivate behaviour.
In general, they should “move the middle” — motivating the performance of the broader audience, not just top performers. There is a place for top performer rewards and recognition for sure. By the way, your team knows that the same people win all the time anyway so you need to address this perception.
The challenge is also that the lift from top performers can bring to your overall results simply isn’t large enough against the overall potential of the team. And, forget the 80/20 rule (sorry Vilfredo Pareto) it’s not 80/20. Our research tells us that 46 percent of performance comes from 80 percent of your team.
That being said, don’t assume that the team will be automatically engaged. Make sure you ask for a commitment. People who choose a goal or opt-in are much more likely to succeed. Speaking of succeeding, where ever possible, goals should vary by individual relative to their own performance.
It’s called “Idiosyncratic fit”. People need to have a reasonable chance of winning to embrace a goal. If you let people choose:
Yes, on two fronts.
Our statistics show us that time and time again, the largest percentage of participants choose the highest goals. We need to plan out goals that are good for the participant and the company; it’s called “choice architecture” – helping people make the best choices by offering limited options.
After executing an incentive program, there is a great opportunity to establish a “new” normal for performance. It’s called the “hedonic treadmill”. People always want to move to the next level. Those who achieved will be keen to do it again and those who didn’t will try harder and want to be successful as well.
Create competition and communication around results. We all want to be seen as successful in what we do and often judge our success relative to those around us, known as “relativity bias” — commonly called “keeping up with the Joneses”.
Change it up; don’t run the same programs all the time. Add an educational component; we firmly believe that learning and engagement drive performance. International research based on our New Rules Index™, shows that learning is fundamental to employee engagement. Of course, well-designed incentives are measurable, have a defined ROI, and should be self-funded through the attainment of program goals.
There are challenges in executing great incentives. Our recent study across 575 sales compensation experts identified that even the best-designed incentives encounter execution hurdles. Execution is critical. It sounds obvious, but one of the biggest challenges is having timely and accurate data to build and execute properly.
Some interesting statistics were uncovered in our research. 45 percent of participants reported having competing incentives within the same time period. 25 percent indicated a lack of support from frontline supervisors and 37 percent from other functions or departments. Simply put, managers matter! Leadership support and engagement in promoting performance is critical.
Focus on clear on-going communications with your target audience and gaining buy-in from your managers and supervisors. Consider having goals and rewards of their own or for their team’s performance.
It’s a process and there are several key steps to consider:
Cash is great. We all need it but it’s not inspirational or memorable. It immediately creates a calculative mindset “Is this a good deal?”
THE MERCHANDISE AND EXPERIENCES EFFICACY CONTINUUM
Our experience has overwhelmingly shown that tangible awards drive higher performance. Whereas travel or tickets to the theatre, concert or luxury merchandise are more emotional in nature and the question becomes, “Do I want it?” The farther away from the dollar sign, the more effective the rewards become at changing behaviour. We refer to it as “mental accounting”. Rewards separate wants from needs. Participants can redeem for something they want.
There are a few key reasons tangible rewards are so powerful:
“Sociability”, it really isn’t acceptable to tell your friends how much your cash bonus was, you can, however, watch the big game together on your new 85” big screen and tell everyone how you got it as a result of your performance at work. It’s the difference between sharing and showing off.
And the good news for you, the employer, is that we remember how we got that reward all the time, it’s called “Re-consumption”. Simply put, it’s being reminded of how you earned something. If your incentive is designed properly, it should align with your strategic objectives.
The reality is that people won’t spend their own money on certain things, no matter how much they want it. “Justifiability” is a key reason that rewards are compelling. It’s the permission to get what I [the participant] want. Rewards and recognition also create “subjective well-being” which helps people feel better about the work they are doing.
There is an increasing indication that experiences and travel are the most desirable rewards that can influence behaviour change. Running programs in over 160 countries, we’re seeing the trend is definitely toward more experiences and fewer “things”. The power of personal choice and the ability to curate rewards that appeal to specific individuals is essential. A few points regarding the benefits of tangible awards, effective awards are positive, immediate, and certain:
The program shouldn’t be a surprise! A strong sustained communications campaign is critical to the success of any incentive program. People remember things that are graphic or dramatic, known as “vividness”.
The communication plan should target the entire impacted audience — sales representatives, front-line managers, leadership, and other key stakeholders. Make some noise and grab attention when you announce the program. Outline all incentive components, raise awareness, and inspire employees to achieve the program goals.
I said it before, managers matter, involve leaders. Drive engagement and support with messages from front-line managers and senior leadership. Participants especially appreciate seeing executive involvement. It sends a strong message. Don’t rely solely on reward platform technology or digital communications; we are all bombarded with digital communications. You need to cut through the clutter in the beginning, throughout, and at the end. Hold kick-off and celebration activities. These provide a fun way to create excitement and momentum.
Have regular follow-up communications with performance updates. We tend to judge our success in comparison to others. It’s called “relativity bias”. Keep the incentive front and centre, encourage active participation, remind participants of the goals, provide progress details, and promote awards. You can’t over-communicate. Finally, send winner/award notifications. Inform participants of the program results and thank them for their contributions.
Perhaps the most important step, evaluate the incentive to quantify what was invested and what was achieved. We’re all accountable to someone and they will want to know the investment was worth it. Measurable results should be built into the design that helps determine the program’s value.
There may also be intangible benefits that cannot be measured as such as team building. It’s a relevant side benefit but accountability for a financial impact will allow for long term impacts. We don’t want to wait until a program is over to find out how successful it was. It’s important to evaluate a program — not only upon completion — but throughout the program to ensure it’s performing as designed or to give you the opportunity to make corrections, if necessary.
A post-incentive evaluation should be conducted as quickly as possible after the program ends — and shared widely.
This allows you to:
We know that 77 percent of human behaviour is driven by emotion. The best incentives leverage the science of applied behavioural economics to drive decisions and behaviour. This can be broken down into three key areas:
Behavioural economics can also help us determine which program structure is right for which circumstance. Generally, there are two types:
There are a few things to consider:
As mentioned earlier in our research of 575 sales compensation experts, when asked about the effectiveness of non-cash rewards, here is what survey respondents said they use award points programs to accomplish:
At BI WORLDWIDE Canada (BIW), we inspire people and deliver measurable business results. We employ communication, training, measurement, and rewards as the foundation to inspire behaviour change and achieve results for our clients.
Each organization is different, so we first work out what your overall business goals are. Once known, we help define the employees’ performance objectives and design and deliver innovative incentives — grounded in the science of behavioural economics — to align with your business strategy.
To learn more about the ways our team can support you in driving performance, feel free to reach out to us at firstname.lastname@example.org.