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A Guide to Performance Improvement
Why are incentives so important?
In an increasingly competitive world, with high price sensitivity and lack of loyalty it is becoming more and more important for companies to differentiate. In order to gain a competitive edge with both customers and employees many companies today consider incentive programs to be an essential part of their marketing arsenal.
Incentive programs are commonly geared towards increasing sales and market share, though importantly there are many other benefits derived from a carefully planned and executed incentive program which this guide will cover.
How can an incentive programme help my business?
Whatever the challenge that you are facing – motivating your employees, retail or dealer networks, increasing your direct marketing responses or stimulating customer demand; a successful incentive programme will save your organisation time and money and will help your business to grow. Financial benefits will be derived as a result with more efficient processing of data, increased sales and a reduction in wasted costs.
The key ingredients for success
1. Communicate, communicate, communicate
Communicating an incentive scheme effectively is crucial to ensure participant “buy-in” or “take up”. It must be clear and easily understood, so that the participants know exactly what they have to achieve and what is expected of them in order to earn their rewards. A recent report concluded that UK businesses could save over £2 billion each year by communicating employee benefits better.
2. Set realistic targets and goals
Setting goals for your sales people or customers that are too high is a sure fire way to achieving nothing, so it is important to set realistic and fair targets. It doesn’t matter how good the rewards are, if people feel they will not be able to achieve them they will not even try.
3. Reward all of your achievers
It is important to reward everyone who is successful and not just your top achiever; of course your top achiever should receive extra reward but remember you don’t want to create one winner and lots of “losers”. Rewarding everyone’s success promotes a more productive atmosphere and allows you to reward the very top achievers properly without creating bad feeling and de-motivate others.
4. Reward your achievers more often
It is important to maintain momentum with any incentive programme or sales promotion and a big part of this is showing your participants that people are winning, and winning regularly. Having one winner per year will be a turn off to those who are too far behind a top performer by the half way stage, and feel they have too much to do to be in with a chance of recognition. It is important then, not to cast these people to the wayside but give them short term objectives to work to such as achieving “employee of the month” or “most improved award”
5. Recognition is as important as the reward
Making your people feel valued is a giant step towards achieving a well motivated team, which is why it is so surprising that in many cases the presentation of incentives is neglected. Most people will relish the experience of public recognition by their boss or peers, so when you have a reward to present get your team together to celebrate the success.
6. Encourage sustained effort
It is important to certify that your programme has durability by continually reviewing and refining the initial plan. The focus of your programme will inevitably alter over time due to the ever changing market place and shifting objectives of your company. Facilitate regular workshops to assess these changes in order to fine tune your programme ensuring sustained effort, success and progress. You need to engage your participants by keeping your programme fun, fresh and interesting.
7. Measure results to ensure investment payback
Constant evaluation and analysis of your programme ensures that “buy in” and ROI remain high. Your scheme will be structured so that your management will be able to easily identify pockets of excellence as well as training needs and areas that require attention.
Deciding on the rewards
Deciding on the rewards is one of the most important parts of designing a successful scheme, if the rewards are wrong, your audience will not be excited and in turn they will not strive to achieve them.
A classic example that we use regularly is that of a top sales achiever for a major blue chip corporation. She had been presented with a bottle of wine or Champagne on a number of occasions during her employ, for achieving extraordinary sales figures. She would have been pleased enough with just the recognition but the reward was usually given in a one-to-one environment rather than in front of her peers.
To make matters worse the Sales person in question did not even drink wine or champagne…and what started out with all good intentions actually became a de-motivator. The point of this true story is that the management had not taken the time to find out what really motivated their most valuable assets. You must not assume that because no one has ever complained that everyone is happy and motivated.
Why non-cash rewards for employee motivation?
You may think that cash is an easy reward option – if polled, people will say that cash is what motivates them the most. After all, cash has universal appeal and the recipient can use it in any way they wish. This is true of course, but cash blends in with other income and is more often than not used for more mundane purposes, such as paying for shopping or a credit card bill; rarely is it used for a personal luxury. The point is, to get your people to work towards something they “want”, not necessarily what they “need”. They will get more excited about something that is special or extraordinary to their normal life.
The further danger of cash rewards is that people begin to except the reward as part of their salary, making the reward very difficult to discontinue without demotivating the people you set out to motivate.
The advice is clearly not to outlaw money completely as a motivator. That would be nonsense. But it has to be put in its rightful place if the discussion is about effective incentives. Money will certainly reward people for an historic job well done, but it rarely works as well as a non-cash rewards if you re looking for improved or incremental performance.
- Salary, commission and PRP have their place in rewarding historic performance
- But cash costs more to provide than non-cash
- Beyond an employee’s comfort zone, cash exhibits diminishing returns.
- More money is the least efficient and effective motivator.
Tax & National Insurance
Most benefits in kind are subject to Income Tax and National Insurance, and in many cases companies will run their schemes tax paid, so that the employee does not have to suffer the short fall from their wage packet. Companies will generally enter into either a PAYE Settlement Agreement (PSA) or a Taxed Award Scheme (TAS) in order to account for any liability arising from reward employees. Both types of scheme allow for the company to settle, in a single payment, any Income Tax or National Insurance liability arising on the awards. Information regarding current PSA rules is detailed on leaflet IR155, available from the Inland Revenue, your Local Tax Office or it is available to download from www.inlandrevenue.gov.uk. For more TAS information contact the Incentives Valuation Unit on 0161 261 3269.
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