Do Employee Incentive Programs Work?
It's no surprise that employee engagement can lead to higher workplace morale and increased productivity. But for many businesses, the challenge lies in finding effective, meaningful ways to keep staff engaged.
Some businesses host employee bonding sessions like holiday parties and volunteering events. Others implement employee incentive programs to show their appreciation. But the question remains: Do employee incentive programs work? Or are they more expensive than they are worthwhile?
For the most informed answer, let's break down what an employee incentive program is, what it involves, and some supporting data that paints a clearer picture of its effectiveness.
An employee incentive program is a system put in place by employers to reward their employees for certain work achievements. Incentive programs, including incentive pay, come in different shapes and sizes, but they usually include some sort of financial compensation or bonus.
These programs are designed to motivate employees to do their best work, improve workplace productivity, and encourage teamwork. For example, if an employee hits their quarterly sales target, they may receive a cash bonus or commission.
Monetary compensation is a powerful motivator. It's a tangible way to show employees that their hard work is paying off and that their employer values their contributions to the company.
To start, employee incentive programs typically feature a three-step process: attract, engage, and retain.
1. Attract: The first step is to attract employees with an incentive program, in addition to a competitive salary and benefits package. For example, you could provide more information about your company’s incentive program after an offer letter is sent to a prospective employee. Ultimately, incentive programs can separate your company from competitors and attract top talent in the future.
2. Engage: The second step is to engage employees. This is where employee incentive programs come into play. By offering rewards for great work, employers can encourage employees to be more engaged and in turn improve customer satisfaction.
3. Retain: The final step is to retain employees. According to Enrich, it costs a company six to nine months of an employee's salary to replace him or her, so businesses should make every effort to hold onto talent whenever possible. One way this can be done is by offering career development opportunities, such as continuing education and training programs. For example, you can leverage your company’s incentive program to feature payment bonuses and growth plans after a job well done. You can even include employee feedback to show your appreciation or gently nudge your employees to do better.
Employee incentive programs also involve setting specific goals for employees and offering a reward if they reach or exceed them. These milestones can be anything from improving customer satisfaction scores to increasing sales numbers.
The rewards offered by companies differ, but they usually take the form of cash bonuses, paid vacation days, or gift cards. Some companies also offer non-monetary rewards like extra break time, flexible work hours, or the ability to work from home.
When implemented and measured correctly, employee incentive programs work well for all kinds of businesses. According to research by the Incentive Research Foundation, employee incentives in the form of money or awards increased team performance by 22%. Team incentives, on the other hand, can improve performance by as much as 44%. Employee incentive programs have also been shown to:
Incentive programs show employees that their hard work is noticed and appreciated. This, in turn, leads to higher levels of employee engagement which can result in improved job satisfaction and decreased turnover rates.
Employee incentive programs can also help businesses attract high-quality job candidates. When job seekers see that a company offers incentives for good work, they're more likely to want to work there
Employee incentive programs help boost workplace morale. When employees feel appreciated and motivated, they're more likely to be happy with their jobs and stay for the long term. This leads to a more positive work environment for everyone.
Employee incentive programs can also help build loyalty among employees. When workers are rewarded for their performance and commitment to the company, they're much more committed to the success of the organization. Employee loyalty is also linked to happiness, and the latter can translate to hefty profits, according to Forbes.
Finally, incentive programs can improve employee retention rates. When employees feel like they have a good reason to stay with a company, they're less likely to look for a new job.
The effectiveness of an employee incentive program comes down to how well it's executed. But some programs simply perform better than others. There are three types of programs that typically outperform the rest.
• The first are quota-based incentive programs. These are programs that reward employees for reaching or exceeding specific goals. They work well because they give employees a clear target to aim for and a tangible reward to earn. According to Incentive Research Foundation, these are the most effective incentive programs.
• The second type of effective employee incentive program is a spot bonus. Spot bonuses are one-time, on-the-spot rewards given to employees for exceptional work. A Towers Perrin analysis found that 68% of firms with recognition programs offer spot bonuses. They're effective because they show employees that their work is noticed and appreciated at that very moment.
• The last type includes tangible incentives, like money. But it’s important to note that not all tangible awards are created equal, and some may be more effective than others. According to Allan Schweyer, Co-Chief Researcher at the Incentive Research Foundation, “When people receive a cash reward, they tend to treat it like salary and use it for forgettable things—paying the electric bill, for example. Tangible rewards…on the other hand, stand apart from salary; perhaps especially when they address what an employee wants as opposed to what they may need.” Tangible incentives work well because they give employees an immediate sense of accomplishment and a physical reminder of their hard work.
When used correctly, employee incentive programs can be a powerful tool for keeping employees invested in their work and their company. If you're thinking of implementing one, consider which type would work best for your business. You should also:
Here at Tango Card, our Reward Link® product lets businesses quickly and easily reward their hard-working employees with gift cards of their choice. This service comes with no subscription fees, and you can brand your emails to make rewards more meaningful.
Email sales@tangocard.com to learn more about employee incentive programs and if they really work. Or check out our resources and information to find new and innovative ways to keep employees engaged.
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