Feature Article - May/June 2010

Measure for Measure

Maximize Value Form Your Incentive Program

By Rick Dandes

Best Practices

To maximize your incentive program results—and your ROI—include recognition and non-sales employee incentive programs in your arsenal of tools for success. These initiatives will help you gain the support of all the people who can influence your goals and influence all the areas of your business.

"If you're not actively engaging employees in your goals," cautioned Smith, "they may be working against your efforts, even if it's done unintentionally or inadvertently. None of us can afford to take that chance in the increasingly competitive environment we find ourselves in. Smart leaders are addressing a broader audience of employees in their programs to reinforce and ensure the corporate results they set out to achieve."

Research validates Smith's pronouncements: A study by the Forum for People Performance Management & Measurement found a direct link between employee satisfaction, customer satisfaction and corporate profitability, even when the employees involved did not have direct customer contact.

"There is a growing body of other research linking incentive initiatives to increased shareholder return, revenue growth, stock performance, job growth, profit and market capitalization," Smith said. In a sense, this has transformed incentive programs from a nice-to-have to a must-have business tool, which can maximize results by including all the people who can help you succeed.

Another best practice is to consolidate programs to increase their effectiveness and ROI.

Traditionally, companies run a number of disparate incentive programs that span numerous departments. The most popular approach has been to allow each department to implement a unique incentive program with goals and rewards specific to the individuals in that unit.

The sales department will reward quotas met and exceeded, while customer service might reward customer retention figures or telemarketing metrics. However, when you have misaligned and separated incentive programs within an organization, there is poor accountability to ROI and overall success. Most companies don't even realize how much they're spending on incentive programs let alone how much value they're extracting from them.

Smith explained that running a multitude of disparate incentive programs also undermines the opportunity of creating a consistent, over-arching performance-based culture throughout the company.

"Incentive programs," Smith said, "should counteract divisiveness, not encourage it. In many organizations, certain departments are in the spotlight more than others, despite the fact that their individual contributions are every bit as important to the overall goals of the organization. Don't make that mistake. Having a single over-arching program—customized to each department's unique goals—helps to maximize the return on the incentive investment. It also gives a snapshot of individual and departmental performance, and the progress of the company as a whole, something that effectively demonstrates ROI."