Incentives Done Right

• By Anita J. Hall
• Jun 18, 2007

THE term "incentives" has been floating around in the business world for decades now, yet the prevalent and effective use of them still continues to trail behind what is not just a trend, but rather a necessity in today's economic environment. Although there are a variety of applications for incentive programs (which include loyalty, reward, and promotional programs), perhaps the more underutilized applications fall into the categories of recognition and performance improvement geared toward sales and non-sales employees.

How can middle and upper management best utilize incentives, particularly to achieve safety and health/wellness objectives in the workplace? The key lies not only in the incentives themselves, but also in developing a comprehensive plan that incorporates specific goals, measurable results, communication, feedback mechanisms, and tools for evaluating the most important element: return on investment.

All too often, incentive programs are abandoned by companies because they are deemed as ineffective. These conclusions are natural because managers often have little to no data that can actually prove or disprove such theories. In addition, incentive programs lose their luster when communication efforts are sporadic and inconsistent, while participants' milestones within the program are not celebrated and promoted. All of these factors can lead to a stale and irrelevant program. More critically, they can sabotage the likelihood of management's embracing future incentive program ideas.

In order to overcome these potential pitfalls, it is important to map the pivotal components of an employee incentive program before it ever hits the road. Answering questions that will facilitate the development of a successful incentive program include:

1) Identify specific objectives for the program, preferably ones that are quantifiable. One of the greatest challenges in creating a successful incentive program centers on choosing goals that are tight, focused, and do not compete with other initiatives, which might making evaluating results and ROI more difficult.

2) Understand the budget for the program and how it affects the planning process. Working with a limited budget requires careful consideration as to what portion will be dedicated to key program elements such as communication, additional resources, reporting, and the incentive choices.

3) Determine the target audience. Ensuring the participant group is well aligned with the objectives set for the program, as well as the communications, feedback process, and incentive options, is critical to delivering a beneficial program.

4) Calculate how many participants the program will be offered to and whether or not there will be a limited or unlimited number of qualifiers for the incentives. Knowing how much redemption there may be within an incentive program and over what period of time will help to manage the budget more effectively to ensure the incentives are meaningful and make a lasting impression based on the required level of effort and behavior modification.

5) Establish a timeframe for the program. That is, will it have a specific ending date or be ongoing? Programs that are more short-term in nature may require a smaller budget, more frequent communications, and less opportunity to make changes along the way. Conversely, ongoing programs generally cost more, require more frequent modifications to keep the program fresh, and may feature a broader assortment of incentive choices.

6) Define how the program will be communicated to the target audience, which may include selecting communication vehicles, estimating the frequency of communication, and outlining the purpose of each communication. Using a variety of communication vehicles such as e-mail, pamphlets, company intranet sites, and even group voicemail systems can deliver critical information in a timely manner, but keep the program exciting and relevant to participants.

7) Create opportunities for participant feedback that enable you to assess the success of the program and make modifications throughout its duration. Encouraging feedback from management and participants involved in the program is an important but often neglected step in the planning process. Creating simple and effective communication channels for feedback is likely to deliver a greater level of engagement and overall desire to modify behaviors that align with the program objectives.

8) Ensure that data and reporting are available to let you evaluate results. Nothing can be more disappointing and problematic then realizing that key data and reporting are not available to evaluate a program that has already been launched. Scrambling to piece together data after the fact is time consuming and far less effective in demonstrating results. In addition, developing new information systems or specific reports might involve IT resources, which will add costs to the program that need to be factored into the budget.

9) Research incentive choices with ample selection and the demographics of the target audience in mind. Knowing your audience is instrumental to offering the right assortment of incentives that will drive positive behavior and motivate participants to rally around the program objectives.

10) Evaluate and report the results of the program often to foster employee engagement, while using key measures to determine return on investment. Even the most successful incentive program can become unsuccessful when results and achievements are not communicated to management and the participants themselves. Sharing data that reiterate the purpose of the program, identify successes, and engage participants to overcome potential weaknesses is invaluable in ensuring better results.

Finding the Resources
With these critical components in mind, an employee incentive program will be more robust and better received by the participants. Also, these items allow for a more thorough approach to the use of incentives. Nonetheless, knowing the right steps for building an effective incentive program and having the proper resources to do so can sometimes pose an additional challenge.

Today's modern companies are operating with more streamlined infrastructures that do not always lend themselves well to internally managed incentive programs. The good news is that a variety of outside companies specialize in building and managing incentive programs, many of which focus on employee recognition, performance improvement, and health/wellness initiatives. Finding well-suited resources does require research, time, and commitment; however, it is more likely to ensure a successful program if internal resources are slim.

Although the use of incentives by corporate America is still fairly untapped, a number of useful organizations can make researching information and finding options for offering incentive programs much easier. Trade associations such as the Incentive Marketing Association, the Incentive Gift Card Council, the Online Incentive Council, and others provide valuable articles, case studies, and membership lists that facilitate locating partners and answers to preliminary questions.

Choosing the Incentives
Regardless whether the safety or health/wellness program is ultimately managed internally or by an outside company, it is equally important to consider the types of incentive items to offer. There are countless choices available in the marketplace, including merchandise, travel, promotional items, and one of the more dominant forces, gift cards. Recent research studies conducted by industry trade publications and other independent parties, such as the Incentive Federation and Stored Value Systems (a division of Comdata) have led to conclusions that gift cards are one of the most popular products among consumers in the gift market and among incentive planners in the business-to-business market.
Why has the market shifted and accepted products that were once thought of as somewhat impersonal and lacking the all-important "trophy" value? The answer is actually quite simple. When it comes to consumers (who ultimately participate in incentive programs), gift cards embody all of the benefits that most of them adore about their love affair with shopping: Gift cards deliver choice, flexibility, and convenience. This bodes well for gift-giving purposes and translates into their attitudes when becoming engaged in an incentive program.

Incentive planners within organizations, as well as within outside companies that manage incentive programs, can respond to these consumer trends and behaviors. By offering gift cards as stand-alone incentives or in conjunction with other relevant merchandise or travel, incentive planners not only can embrace what participants find meaningful, but also can enjoy a variety of benefits related to the program itself.

Some key advantages to using gift cards as incentive tools include easier program administration, broader audience appeal, diversity, choice, high perceived value among participants, cost effectiveness coupled with lower overhead costs, trophy value, the ability to leverage the strength of other brands to drive program engagement, and a broad range of price points that can work within any budget.

And, based on the 2006 Merchandise Facts Report published by Incentive magazine, incentive planners are capitalizing on these benefits across a variety of program types, because gift cards ranked as the Number 1 incentive choice in consumer promotions, sales incentives, dealer incentives, and non-sales incentives. These data would suggest that incentive programs geared towards employee recognition, performance improvement in the safety category, and health/wellness also can most certainly benefit from a strong mix of targeted gift cards that fit the demographics of the participants.

Furthermore, gift cards have come a long way since their early inception, in that some companies are offering environmentally friendly products such as bio-degradable gift cards made predominately from corn, as well as the ability to select customized packaging, photography, messaging, and other forms of media to fully personalize the presentation.

Keys to Incentive Success
Having said that, thorough incentive program planning and selecting incentives that are relevant and in line with a broad range of employee groups are the keys to expanding the successful use of incentive programs today and beyond. Dominant market trends will continue to prevail and further solidify the need to utilize incentive programs in addition to a strong compensation and well-rounded benefits packages.

These trends include the prevalence of corporate budget constraints related to salaries and wages, which will only point to a greater need for more non-compensation-oriented incentives. Additionally, shifts in the demographic make-up of employees driven by the retirement of Baby Boomers will pave the way for incentives to play an integral part in not only hiring and retaining younger employees, but also using incentives in a strategic way to motivate engaging behaviors that are required to meet the goals set by organizations in the years to come.

This article originally appeared in the June 2007 issue of Occupational Health & Safety.