Struggling to figure out how to increase customer satisfaction? Tired of the lackluster employee performance that can come with simply paying employees to show up and breathe? There might be some benefit in creating a formal incentive plan for employees in hopes of producing more and better products or customer service.

An incentive is the reward given to an employee in exchange for a behavior or performance of a task. “If you do ‘x’, then you’ll get ‘y’.” However, with the complexities of employee incentive plans, proceed thoughtfully and with care. Without thoughtful advanced planning and insight into the correct way to align the incentives with business needs, you will most assuredly end up “inciting” employees to exhibit unproductive behaviors. In that case, your company ends up with unwelcomed and unintended consequences.
Here are 6 leadership failures that could cause incentive plan to be more “incite-ful” than “insightful”:

1. You failed to align the incentives with business needs.

With poor alignment, there is little or no
correlation with your business processes, products or services, or customers’ needs. To avoid misalignment, think about what you are trying to achieve by using an incentive, including what you want to achieve with your customers.

2. You forgot about fairness.

An unfair incentive fails to account for the amount and extent of control participating employees have over the end result, whether they work individually or with a team. This means employees don’t have a good opportunity to affect the desired result. To create a fair incentive, the design must account for the employee’s abilities to have an impact on the desired outcome and to control what they do to affect the outcome.

3. You weren’t transparent about how it works.

Employees don’t have a clear understanding of what’s important to do for the sale and for the business need. Spelling out the reasons and working of the incentive program to employees is key.

4. You don’t understand the “M.O.” of the participating employees.

Incentives work best with functions that are very production-based versus with those functions that require more creativity and discernment. Additionally, the incentives used should be correlated to the intrinsic motivation(s) of the type of employee who typically works in those positions.

5. You’re missing out on other types of rewards you could use, such as recognition.

An incentive program isn’t just about the “if-then” rewards available. Its effectiveness can be greatly enhanced by using acknowledgement, recognition, and even bonuses.

6. You fail to pilot the program and to monitor it throughout implementation.

Before rolling out the plan, it helps to have participating employees weigh in on just what the proposed incentive will encourage them to do – good and bad. Then during implementation, watch for unintended behaviors and results, so you can tweak as needed as soon as an unintended result is noted.

People are not machines. Before implementing an incentive plan, call on experts to assist in the design and carefully consider what outcome you are really trying to accomplish.

 

This blog post was inspired by a conversation with Russell Lookadoo of HRchitecture. Russell Lookadoo is the HR Guy for small businesses. His firm, HRchitecture, specializes in helping business leaders accomplish their goals by effectively using their teams. Russell brings three decades of experience designing Human Resources solutions that achieve business strategies in varied organizations ranging from a small manufacturer to the nation’s second largest bank.

Since 2005, Russell has enjoyed focusing on small businesses and has honed his skills in family business matters, partnership disputes and other challenges unique to small privately-owned companies.

He is the only consultant in the area to combine his broad corporate Human Resources background with a decade of practical business advising with small businesses. This unique combination allows Russell to work closely with business owners and key leaders to find solutions to their business challenges and align the personal vision of the owner with that of the companies.

Russell holds the Senior Professional in Human Resources designation from the Society of Human Resources Management and earned the Certified Compensation Professional designation from World at Work. Russell attended the University of North Carolina on the prestigious Morehead-Cain Scholarship and graduated with a Bachelor’s in Industrial Relations. Visit his website at http://www.theHRGuy.biz.