Guest Column - September/October 2009

Make Your Case

The Business Case for Effective Incentives

By Dave Peer


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lain and simple—non-cash incentives are good for business. Properly designed incentive programs can impact a company's bottom line in many different ways. In a difficult economic environment, like we are currently facing, it is more important than ever to recognize and reward those important to your business. This can include everyone from employees to consumers and dealers/distributors to sales. Every person involved with your business can be motivated, and your company can benefit from the results.

Benefits of Employee Incentives

Incentives directed toward non-sales employees can result in a number of benefits and cost-saving opportunities for your company. Depending on the nature of your business and the dynamics of your employee base, different initiatives will apply. Some of the objectives of employee incentive programs can include:

  • Employee Retention/Years of Service
  • Safety
  • Wellness
  • Employee/Customer Referrals
  • Suggestion/Best Practices

A well-designed incentive program will reward employees for achievements in all of these areas—or at least those that are applicable to their position—and allow them to accumulate points for a larger award. Programs that reward behaviors in these areas can result in significant cost savings for your company.

One example: Employee turnover has proven to be very expensive. An article from The Advisor states that turnover costs can easily reach 150 percent or more of the employee's compensation figure. Costs certainly vary depending on the position and compensation of the employee, but the same items factor into the total. Items such as training, recruiting, lost productivity, lost sales and new hire costs add up very quickly. Recognizing and rewarding an employee for tenure should be far less expensive and result in greater benefits. In positions with traditionally high turnover, recognizing milestone anniversaries early in the employment process can help with retention. We have worked with a client who celebrated and awarded points for achieving a six-month anniversary.

Costs associated with workplace and on-the-job injuries can also be an enormous expense for a company. Again, it varies greatly depending on the company and the type of work being done, but for those subject to these types of costs, a safety incentive program can result in cost savings. An effective safety program will reward employees for undergoing safety training and practicing safe behaviors, recognizing those who submit "Near Miss" reports, and not just awarding points for accident-free periods at work. According to an article from Construction Business Owner published in May 2008, every year more than 6 million U.S. workers suffer workplace injuries with an estimated annual cost to businesses of $128 billion. While there is no price that can be put on a human life, every year in the United States there are more than 6,000 workplace fatalities, mostly among men ages 24 to 54. In addition, there are another 50,000 deaths each year from occupational illnesses due to exposure to a workplace hazard. These numbers are staggering and while an incentive program certainly cannot prevent all of these injuries and deaths, it can generate greater awareness and vigilance on the part of employees at a cost that is minimal.

Wellness incentives have been growing in popularity as employers have looked for ways to control increasing insurance costs and also benefit by having healthier employees. A recent study by Health2 Resources found that the percentage of companies measuring ROI for their health and wellness programs has risen from 14 percent in 2007 to 73 percent in 2009. Of those measuring their program's ROI, 83 percent say the program returns better than 1-to-1 on their investment. More than half of the employers surveyed (53 percent) offer smoking cessation programs to their employees, with programs targeting weight management and physical activity close behind. Another trend indicates that families are becoming more involved and incorporated into the programs. Healthy employees are able to work more, leading to increased productivity. It's a win-win!