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A Complete Guide to Motivating Your Employees Through Performance Incentives

A Complete Guide to Motivating Your Employees Through Performance Incentives

Performance incentives let your employees know that you're invested in their success long-term. If you want to create a dynamic, data-driven incentive strategy, read on!

Introduction

Keeping employees motivated, inspired, and productive in today’s age of social media, remote work, and the uncertainty of post-COVID times is more challenging than ever. First, you’ve spent all this time recruiting and hiring. Now, you’ve got to figure out the best way to keep the people at work, doing their jobs in the best way possible.

As a leader, you may wonder if monetary or other types of incentives could help keep employees working at full capacity, or if they would be ineffective and not worth the cost.

A study by Willis Towers Watson found that only 20% of employers in North America actually believe merit increases are effective in driving high performance. This makes sense as traditionally money has been seen as the main incentive used to motivate employees. Higher productivity tends to result in higher salaries and bonuses. Historically, it’s been used as the main tool to attract, retain and engage their people. However, today we’ve learned that the key to motivation is much more complex than that.

Employee engagement is not typically about the financial rewards you provide, it’s about the intrinsic motivators that drive people at your company. Say your business hits hard times and you can’t provide pay raises that meet the standards you had set in the past. Employees who are there for the financial rewards will be the first to start looking for new jobs. Interestingly, Gallup found that 64% of millennials who are engaged at work stated they would not leave their job, even if the job market improves.

Price Waterhouse Cooper (PWC) conducted a survey of employees asking them how much extra time they would work if:

a)
They received a bonus for every 15 minutes more they worked, with a cap of 90 minutes

b)
Customer satisfaction would increase when working 150 more minutes

Interestingly, they found that about 30% would work up to 150 minutes, even if they stopped receiving a bonus after 90 minutes. In both cases, we see that people are largely impacted by the purpose behind their work and their ability to see progress or improvement.

The facts are: rewarding an employee for a job well done inspires them to work harder and to be more productive. Data from the Harvard Business Review suggests that 82% of Americans don’t feel their supervisors recognize them enough for their work. Additionally, 40% of Americans also stated they would put more effort into their work if they were recognized more often.

The relationships between motivation, money, and productivity are shifting. According to Ashley Whillan, an associate professor at Harvard Business School, employees may no longer be incentivized with pure cash.

What are incentive programs?

Incentive programs are the institutionalized use of things such as rewards or recognition to motivate employees to behave in a certain way or work to a certain standard.

What do you want to happen? All employers want their staff to do their work and do it well. Employers want employees to be productive, efficient, and focused on delivering quality work.

What do employees want? They (usually) want to do a good job, but they want rewards on top of their current salary and benefits. An effective incentive program encourages “desired behavior,” for example, quality work done on time, by offering rewards and recognition.

Incentive programs come in all shapes and sizes. Depending on your company budget, you might implement an incentive program in one of these popular categories:

  • Monetary
  • Recognition
  • Rewards
  • Experiences
  • Professional development

Monetary

Monetary incentives are a common reward that most employees appreciate:

  • Bonuses: You can pay ad hoc bonuses, which is an unexpected bonus for completing a project, or to thank a team for their work. Offer performance bonuses when individuals or teams meet specific goals.
  • Profit shares: Profit shares translate to part ownership in the company. This incentive motivates employees to be more active in a company that they partially own. The amount of the shares depends on how profitable the company is.
  • Commission payouts: Commission payouts are an incentive for sales-based positions. If an employee reaches a certain sales threshold, they can receive a commission bonus. These payouts are typically a percentage of the sales they were directly responsible for generating.
  • Raises: This incentive recognizes an employee's hard work over a long period. Annual raises are common when a team member shows initiative to learn new skills and accept more duties.

Recognition

Recognition is a no-cost incentive that you can implement immediately. Employees appreciate being recognized for their work because it makes them feel valued. It may also introduce friendly competition in the office, which helps increase productivity.

Not sure how to recognize your employees? Download our free Employee Spotlight guide as your starting point!

employee spotlight guide

Rewards

Rewards can include non-cash gifts, like a gift card or preferred parking. Rewards can be a little more personalized for individual employees by considering their hobbies and interests.

Experiences

Experiences can work well for teams that achieve a shared goal. Experiences can include team outings, group lunches or team-building activities that all employees participate in. This both builds camaraderie among coworkers and helps the team remain motivated.

Professional development

Many employees want to learn new skills to advance in their careers. Consider offering professional development opportunities, such as seminars or memberships to take advantage of online courses. Give team members the opportunity to practice their new skills in the workplace by giving them different responsibilities.

How do incentive programs motivate employees?

Simply put, incentive programs keep employees working for your company. According to Gallup’s State of the American Workplace report, 51% of currently employed U.S. workers say they are searching for new jobs, or watching out for new job opportunities to come their way.

According to the same Gallup Poll, only 21% of employees believe that their company manages performance in a way that motivates them to do outstanding work.

One way that employers might tackle this gap in motivation through performance management is through incentive programs. Incentive programs can help workers do their best work.

Employee incentive programs work because they boost employee morale, connect desired behavior with positive reinforcement, and demonstrate that outstanding performance is recognized, rewarded, and appreciated by managers and employers.

What makes employee incentive programs work?

There are several benefits to employee incentive programs that promote overall wellness.

For one, these programs help employees feel more fulfilled in their day-to-day responsibilities. According to a 2018 Cornell University study, people who were rewarded immediately and frequently were overall more interested in and motivated to complete small tasks while at work. Additionally, the same research concluded that after the rewards were removed, the same people were still engaged and interested in their work. This shows the positive relationship between instant rewards and long-term job satisfaction.

Incentive programs also help with staff recruitment, retention and engagement, according to the Incentive Research Foundation. When rewarded the right way, people are not only more likely to stay engaged and employed at your office, but your workplace becomes more appealing, increasing in its desirability even to those who aren’t (yet) employed by you.

Creating the best incentive program

Now that we know employee incentive programs can work, the next step is designing the program that’s right for your employees and your company and will be most effective for the goals that you are hoping to achieve. There are five key steps to creating a great employee incentive program.

1. Define Goals you Want to Achieve

The first step is to set the goals for your incentive program. Begin by asking yourself why you are instituting this program in the first place. Then, ask what outcomes you want to see– how will you know if the program is a success? What results would you expect to see in your employees and your organization?

2. Determine Who You are Incentivizing

Depending on the workflow of your organization and how your departments and employee hierarchies are set up, it might make more sense to incentivize entire teams rather than individually motivate employees.  Some examples include challenging a customer service team to reach a certain CSAT score or a sales team to book a certain number of meetings within a month. This can also be a great way to foster teamwork or even friendly competition.

3. Establish and Share Rewards with Team

Based on your budget and if you would like to institute monetary or non-monetary incentives for your employees, establish what rewards will be and share these incentives with employees so they are motivated to fulfill the associated behavior. Consider automation to reward employees for completing tasks that drive results for your business. Not only is it more effective to recognize those wins in real-time, but you’ll reduce time spent manually issuing rewards.

Need help defining your goals? Check out these 4 activities for establishing Core Values!

core values team building guide

4. Set and Distribute Program Requirements

Ensure that you set clear rules about what standards employees need to fulfill in order to earn the rewards. This eliminates any uncertainty and can avoid an awkward situation where an employee thought they were meeting expectations and expected a reward, but in reality they didn’t fulfill the desired criteria.

5. Ask for Continuous Feedback from Employees

Continuous feedback is absolutely necessary for an incentive program that works for employees. Ensure that employees are a part of the development and improvement process and make sure they feel their voices are heard and the incentives are things they actually want. This will increase employee satisfaction and make your incentive program more effective.

Employee incentives are a powerful tool used for team engagement. Recognizing and rewarding your employees effectively is crucial for retaining top talent and keeping employees happy.

Our favorite incentive ideas!

Get them something off their Amazon Wishlist

Chances are that every single person you work with uses Amazon. If they are anything like us, they probably have several things they have been looking at or keeping tucked away on their wishlist for a rainy day. Why not make it easy by letting them pick their own gift?

Hold a team scavenger hunt with prizes

Sending your employees on a strategic tour of your town or city, while also on a wildly wonderful scavenger hunt, is a fantastic way to motivate your team members. They’ll scour the area looking for hints to the next location till they (hopefully) connect the clues and reach the pot-o-gold.

When sparking a little friendly competition doubles as an exciting and entertaining employee incentive idea, that’s a win/win for everyone. Team scavenger hunts set the whole team out into the fresh air for some critical team-building and that’s something everyone can appreciate.

Swag them out with new company-branded gear

Setting your employees up with rewards like custom branded company swag helps support a positive employee experience and promotes an inclusive work environment. These items promote your company’s mission and values and reward your employees with useful, stylish products they’ll appreciate.

Whether your employees are hikers, bikers, sports fans, coffee drinkers, beatmakers, wine sippers, yoga lovers, candy cravers, organic eaters, journal fillers, or woodland campers, you can create the perfect swag pack. Customizing their gear with your company logo is a thoughtful way of rewarding employees for their best work with branded products they will want to use as much as they can.

Establish a professional development budget

By establishing and communicating a development budget – money specifically set aside for conferences and professional education opportunities – you reward employees who have the ambition to learn. This reward says, “you’re worth the investment,” and gives employees the co-sign they need to seriously consider personal development.

Celebrate milestones

Employee milestone recognition is a great way to retain top talent. When you recognize and celebrate the special days in an employee’s life they feel connected with the organization and its people and are more likely to stay longer. Apart from sending personalized greetings, and crowdsourcing wishes from across the company, giving a reward creates a positive impact.

Day Pass

Let them take a day off any time, no notice, no questions asked. While there are many ways to reward employees for achieving company goals, what can be more motivating than a free day at a moment’s notice?

Trips and travel

Travel can be one of the pricier sales incentive options out there, but it can also be one of the best motivators and culture-builders. Remote teams, for example, benefit a ton from team offsites. Meeting up in a fun location serves a dual purpose of incentive and team-building opportunity.

Team dinners

Team dinners are another incentive idea that plays double-duty — as both a reward and an opportunity to improve connection and morale among the team.

Hanging out together outside work hours is a great way to help your team bond in a more casual, low-stakes environment.

Fancy dinners are a particularly great option for employees (outside sales reps or remote team members, for example) who aren’t in the office frequently and may not otherwise have the chance to spend much time together as a team.

Retention-based incentives

Many sales incentives focus on performance — and rightfully so — but leaders need to encourage more than just deals closed or quotas met.  Rewarding employees for time spent with the company is a great way to spotlight cherished employees.

Incentives tailored to people’s unique interests

Often, the most personalized incentive is the most effective, and no one ever said you have to offer the same reward to everyone on the team.

Tailoring your incentives to each employee’s individual interests means you can more effectively motivate everyone. You can reward sports lovers with tickets to a game, for example, and reward team members who love to travel with airline vouchers.

The key with this strategy is to ensure incentives are of roughly equal value for the same performance.

Health and wellness perks

Many companies today offer health and wellness perks to all employees. But if your company doesn’t, they can be a great addition to the sales incentive program. They’re also a super versatile option that lends well to different tiers based on performance or tenure.

For example, you can cover one team member subscription to a meditation app, while offering someone else a stipend to furnish their new home gym. You can offer experiential health and wellness perks — like a yoga retreat — or buy fitness trackers for your team.

Donations and charitable incentives

Incentives don’t always have to go directly to employees — donations to their favorite causes can be just as special. Plus, with so many employees looking to work for companies that align with their own personal values, charitable incentives can be a big recruiting asset.

You can get creative here, too. Offer a cash donation, give employees a day off to volunteer for their favorite cause, or send charitable gift cards so they can choose any organization that’s meaningful to them.

Meaningful experiences

Whether you’re building a hybrid work environment for your employees or staying fully remote, there’s a deep craving to recapture authentic connections and a shared sense of community lost during the pandemic.

No amount of cash, points, or gift cards will fill that void. But experiences will. That’s because employees can share their experiences with family members, close loved ones, and other coworkers. Watch as they turn their kitchen into a science lab, learn new languages together, master difficult culinary styles, or even take group trips and staycations.

Reward their family, too

In most organizations, there are times when you need your team to work longer hours to get the job done — during the last week of the quarter, for example. Regardless of how motivated employees are to put in that overtime, it’s often at the expense of family time. And, in a way, their family may be “working overtime,” too, negatively impacting the work-life balance.

That’s why incentives that extend beyond the employee — to include their family — are a great option. Sponsor a family dinner at a nice local restaurant or send gingerbread house kits to the entire family during the holidays.


Incentives are a fantastic way to entice employees to perform to their potential and reinforce company culture. They build healthy competition and community, and they inspire engagement, which can lead to greater daily job satisfaction and employee performance. Best of all, they create a culture of appreciation and respect that will make employees feel intrinsically motivated to stick with you for the long term.

Take the opportunity now to incentivize your employees and create meaningful recognition programs and reward systems. Before long, your engagement and retention rates will reveal how meaningful these efforts really are.

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