“Everyone” Is Offering Incentives; What Does This Mean for You?
Recent research from WorldatWork, in combination with Deloitte Consulting and Vivient Consulting, shows that publicly-traded firms, privately-held companies and nonprofit/government organizations all are using and relying on incentive-based pay practices to compete for top talent, as well as to motivate and reward their employees.
“Incentive programs are alive and well at companies from all different sectors,” Kerry Chou, WorldatWork senior practice leader on compensation, tells us. “The data shows no indication of companies pulling back or reducing the use of these types of programs. Incentive and bonus plans can be a critical aspect of an organization’s compensation and total rewards offering. Understanding competitive incentive pay practices can help shape decisions on effective design aspects and overall business strategy.”
So let’s take a look at what the survey is telling us about those pay practices. The study found that annual incentive plans are the most popular across the board, while spot awards are a close second.
As Chou explained to Workplace HR, “The data in the report helps practitioners understand what other companies are doing in terms of incentive plans measures: what they based their payouts on, like financial, operational or customer service goals; and types of plans they use, such as incentive plans, bonus plans or recognition program. Also, the survey results provide prevalence data so you can see which types of plans are being used more and which are falling out of favor. It’s always good to know what others are doing so your program remains competitive.”
Does this mean that offering an annual bonus is the way to go for your company? Maybe, maybe not.
Incentives can help improve performance on specific, achievable goals, while motivating employees. Intellispend, a provider of pre-paid business cards, says that incentives are more helpful than ever now when times are tight, as they can help overburdened and burnt-out employees remain satisfied with their jobs. The organization points out that there are lots of areas where an incentive can be applied, not just at the end of the year: for service anniversaries, idea generation, through peer-to-peer programs, to improve wellness and other behaviors … and the list goes on.
On the other hand, a recently published white paper from P&MM Ltd., titled “Employee Engagement: The Psychology Behind Individual Behaviors,” is quick to point out that a motivated employee is not the same as an engaged employee, the gold standard for many HR managers. “Engagement is when employees are experiencing job satisfaction from a shared understanding of organizational goals that results in enhanced productivity or service levels. Motivation sits on a solid foundation of engagement. It is about firing up employees to achieve specific goals such as sales targets or service levels and then rewarding them appropriately for this achievement.”
The annual incentive that appears to be so popular really may be momst effective in rewarding employees who already are engaged in your company. Gallup’s 2013 “State of the American Workplace” survey notes that although “generous workplace incentives and employee-friendly policies are making headlines,” extravagant perks are not going to drive performance from your employees if they’re not already engaged in their jobs. Keeping them engaged, according to the survey, means using your employees’ strengths to keep them productive on tasks that they find fulfilling. In these terms, a spot bonus that recognizes an employee for a specific job well done might be more effective than an across the company end-of-year bonus. An annual holiday bonus, for example, isn’t likely to help employees focus on successfully completing a crucial project in the spring.
What you might want to take away from the survey is that although “everyone” is offering some type of bonus, not “everyone” is employing a team of happy employees who spend every minute of their day working to build their company’s success; if they were, we wouldn’t need all of this research on employee engagement. So before instituting an incentive plan, consider why you want to reward your employees, examine your options and create an individual plan for your company.
Interested in learning more about the WorldatWork/Deloitte/Vivient survey? All three reports are available via www.worldatwork.org.