Guest Column - January/February 2010

A Few Facts About Employee Incentive Programs

...and Why Every Employer Should Have One

By Jimmy Beyer

mployee incentive programs work. When done right, an incentive program can mean the difference between coming out of this economic morass better positioned than you were when it started—or wondering how the competition got so far ahead of you. The reason they work is because they're good for employees—and so they're good for employers.

G. J. Hart knows this firsthand. As CEO of the 300-unit-plus Texas Roadhouse casual dining group, he explains that when his company takes care of its employees then he knows his customers will also be taken care of. "We invest in our people just as you would invest in anything else," he recently told a reporter. "This is the only way to get returns. During times like these when everyone is feeling the pinch, it is even more important to recognize and reward folks."

Hart cites the incentive program Texas Roadhouse has for employees who spend the day in 36-degree meat lockers cutting the steaks that are served in the restaurant. Not only has it reduced food costs (because the meat cutters are motivated to cut more accurately), it has reduced turnover by two-thirds.

If you're looking for that kind of ROI in your business, here are some proven reasons why you should be using a well-designed employee incentive program—right now—in this difficult economy.

1. Concrete Employer Recognition

Well-designed employee incentive programs are a concrete example of employer recognition. They show that, despite the state of the economy, you value your employees so much that you're willing to invest in them for the future. Even if that "investing" means handing out a $5 gift card as an instant reward for a job well done.

Even an inexpensive program can demonstrate that management at all levels supports the efforts of employees as individuals—something that research, such as that conducted by the Hay Group, shows is increasingly important, particularly to younger employees. Yet, according to McKinsey and Company, only 19 percent of American employers in the past year have adjusted meager budgets to accommodate employee incentives. Nearly two-thirds just cut costs. There's obviously room for improvement.

2. Engagement Aid

While a more robust and transparent internal communication program is vital in today's instant-information environment, an effective incentive program can contribute to getting and keeping employees involved and engaged in their company.

Research sponsored by The International Society for Performance Improvement shows that incentive programs increase interest in work and motivation to complete tasks (15 percent increase), persistence toward goals (27 percent increase) and "thinking smarter" (25 percent increase). Studies of the rise of technology-based social networking, including one from the Forum for People Performance Management and Measurement at Northwestern University, have shown that today's workforce increasingly defines itself as being a part of a corporate community in addition to a variety of social connections. Effective incentive programs can help strengthen the internal bonds of that corporate community connection.