Motivating employees with incentive programs

by James Feldman

Generating company profits today requires sheer will power and the stamina to forge ahead. In order to achieve your corporate goals, you need motivated employees, and the best way to get your employees charged up and motivated to produce is by providing performance incentives.

The excitement and challenge of all business activity centers around motivation. With a properly run incentive program, you will motivate your employees to outperform beyond your expectations. Incentive programs have proven to increase sales and profits, and are a vital part of your total marketing plan.

The incentives you offer to your employees can be in the form of cash, or they can be non-cash rewards. Over three-fourths of the Fortune 500 companies prefer to use non-cash incentives. Expenditures for these programs exceed billions of dollars annually, as companies supplement their salesperson compensation plans (straight, salaried, or commissions and bonuses) with non-cash incentive programs.

Incentive programs are equally as effective in either an "up" or "down" business climate. In fact, successful companies continue to use incentives throughout all economic cycles. When market demand softens, the best competitors recognize the advantage of increasing their share of the market in order to weather the storm. During an "up" market, incentives can help accelerate new product introductions and distribution expansions to further increase market penetration.

How important is an incentive program in a firm's total marketing program? Consider the fact that well-run motivation programs have garnered worldwide recognition and are now being considered an essential element of the marketing mix. Excellent examples of well run programs can be found by reviewing The Crystal Awards from the Society of Incentive & Travel Executives (travel), the Show Case Awards from the Association of Incentive Marketing (merchandise), and other national award competitions for motivation programs.

Characteristics of a Good Incentive Program

Public recognition is an important part of any motivation program. Employees love to be recognized in front of their peers. To get your employees excited about your program, first implement a system for recognizing the top achievers, and then make recognition a part of every program within your company. The size or value of the reward is a secondary factor, as long as you are diligent in giving recognition where it is due.

For your motivation program to work well you must first understand your target employee group. For instance, employees with large disposable incomes find free travel and merchandise very exciting. However, those with less overall income may find that "free" still costs too much money. For them, the tax implication alone can be a deterrent to winning a "free" trip. Therefore, it is important to keep these differences in mind when planning your incentive strategy.

Structuring Your Program

For purposes of structuring your incentive plan, you can organize your employees into three categories. Determine what appeals most to each group, and then tailor your incentive rewards accordingly. Following are suggested approaches for three distinct levels of employees.

Level A
The first group consists of blue collar or entry-level workers. They are generally not motivated by travel or luxury merchandise. Their main concern is trying to pay the monthly bills.

The incentive program for this group should be geared to their needs and interests. For the Level A employee who is trying to make ends meet, extra cash is a good motivator. However, gift certificates or vouchers to restaurants, movie theaters, and other leisure time "necessities" often motivate better than cash, and they are free from guilt. They allow the winners to indulge themselves and their families to entertainment that they may have denied themselves due to budget constraints.

If you are committed to using travel as a reward, a fully hosted travel group would be preferable for the Level A employees. A travel package that includes airline, hotel, some meals and some activities, along with the opportunity to enjoy these perks with peers can turn this reward into a desirable incentive.

Level B
The second employee group consists of white-collar middle managers, salespeople, or sales managers. These employees have some equity in their home, their car, and their career, along with significant disposable income. Travel rewards may have greater appeal than merchandise for this group since they may be more flexible with their time and income.

This group contains a wide range of individuals. Therefore, your incentive program must address their incomes, education, interests, and other evaluation criteria. Level B employees are looking for fun, not education in their chosen incentive reward. They put a premium on flexibility and convenience, and are very attracted to vacation travel. Management level employees are typically upwardly mobile, competitive individuals. They like to be in the forefront, and they like recognition. Individual travel is their preferred award. Group trips are less appealing to these employees.


Level C
The Level C group of employees is made up of executive level managers, owners, and distributors. This individual has free time and significant disposable income. Many travel first class, indulge themselves in fine foods, and expect the best for themselves. They have participated in many incentive programs and understand the "rules." Their major interest is the multiplicity of choices and the prestige associated with the awards offered. Non-cash incentives must be very upscale with name brand recognition. Travel must be first class, with special attention paid to the personalized treatment of their "status." To entice these employees, make the reward something that they would pay for on their own.

The word "free" is very compelling to Level C employees. These potential winners earn in excess of mid-six to seven figures a year, so money is not a motivator. They can afford to make their own vacation plans. However, recognition sets them apart from others. They love to travel for free to expensive places and be "treated like royalty." They respond to "ego" trips, to places and events not normally available, at any cost, to the general public. A round of golf in Augusta, GA. (Home of the Masters Tournament), dinner at Versailles Palace, or VIP seating at the Academy Awards will grab the attention of these employees. These incentives have "bragging rights," and nothing is more important to the Level C employee than to be able to say "I was there!"

Marketing Your Incentive Program

There are three steps involved in marketing your incentive program to your employees:

1. Define Your Participants
First you must segment your target audience, by grouping your employees according to their levels and interests as previously discussed. You are free to determine your own categories based on the character of your corporation. Defining your participants will assist you to develop an awards program that is appropriate, with rewards that are suitable for each group. If you are uncertain about what motivates your employees, then you can go directly to them and ask.

2. Clearly State the Objectives
The next step is to clearly state the anticipated end result. You should set measurable objectives that are realistic and attainable. Integrate the incentive program with your entire marketing program and determine the tactics, concepts, and budget. During this stage you will set the timing and duration of the program and issue the rules, which should be clear, simple, and comprehensive. Introduce the awards and state expectations for achieving production goals.

3. Track the Program
The third step is to track your employees' progress and provide progress reports to each department involved. Based on the performance feedback you get, you can fine-tune the program if necessary. Monitor the fulfillment of the awards and interview the winners after they receive their prize. This adds to the recognition factor and is a way to keep interest high for the next incentive program.

The Ultimate Objective

Motivation planning is a universal strategy, whether you represent a small or large company. Motivation programs are an effective complement to many of the marketing strategies companies employ. To get the most out of an incentive program, you need to plan effectively and to set specific goals so that you can quantify the results at the end of the program.

Always remember that the ultimate objective for motivating your employees is to increase your overall productivity and profits. Motivation programs do not cost - they pay. The increase in sales or productivity can be great and represent profits you would not have attained without the motivation program. Reinvest some of these profits into your budget for the next program - you will find that it pays for itself many times over.