Do financial incentives really work to motivate employees?
Incentives, in general, can be highly beneficial in helping employees achieve tasks and accomplish goals.
Incentives can come in a few different forms:
- Recognition and rewards
- Referral programs
- Professional development opportunities
- Financial incentives
- Bonuses and/or raises
- Fun gifts
Any kind of item that is given in response to a job well-done can be an incentive. As you can imagine, financial incentives tend to be what most employees are looking for most.
While incentives can be highly motivating, they must be facilitated in the right way in order to be successful. What does the right way really mean? There are a number of different approaches to offering incentives for employees and in some cases, they can actually be harmful to your organization.
Let’s break incentives down… Specifically, let’s dig into financial incentives.
What are financial incentives?
Financial incentives are often the most coveted of incentives because there’s a monetary value associated with them in some way, shape or form.
These incentives can look like:
- Referral programs
- Wage incentives
- Salary raises
- Retirement and fringe benefits
- Extra allowances
- Stock options
- Profit shares
While all of these provide some kind of monetary value for employees, it really varies from employee to employee on what is most motivating to them.
A salary raise to one employee may be more important than a stock-option whereas another employee may be more motivated by stock options.
Why are incentives successful?
Employers use financial incentives to motivate teams and staff to exceed expectations or otherwise take part in tasks or activities that employees may not normally perform.
A recent study found a few strong key reasons why incentives programs work well:
- Improve performance – they can increase individual performance by an average of 22%. In fact, team incentives can increase performance by as much as 44%.
- Engage employees – they can actually increase interest in work. When programs are first offered for completing a task, a 15% increase in performance can occur
- Attract quality employees – Organizations that offer properly structured incentive programs can attract and retain higher quality workers than other organizations.
- Long-term programs outperform short-term programs – incentive programs that run for a year or more produced an average 44% performance increase, while programs running six months or less showed a 30% increase.
- Incentive programs are valued – both employees and managers stated that incentives programs are valuable to the organization.
- Quota-based incentives work best – programs that reward performance based on meeting or exceeding goals generate the most positive results.
Do financial incentives really work?
U.S. organizations spend over $100 billion annually on incentive programs. That’s not a small number…
The argument for if rewards really work is really more about behavior than anything. Incentive programs are started with the hopes to change how one works and how one prioritizes their day-to-day work.
What these programs don’t always take into consideration is the need for more once they’ve been accomplished.
This one study highlighted that: “Rewards do not create a lasting commitment. They merely, and temporarily, change what we do.”
What happens once employees achieve their goal from their incentives program? Then what? Do they need more? More financial incentive? Or will they continue working as they are with this new behavior without needing something in addition?
And in some cases, it becomes a discussion on quality vs. quantity. Is the quality of the work better than average or are employees more focused on accomplishing what needs to be done just to hit their milestone?
All questions that need to be addressed before implementing any kind of financial incentive program.
What can I do now?
As mentioned before, there are a number of financial incentives that can be offered to employees in an incentive program.
And the arguments for both pro- and con- financial incentive programs are clear, but what matters is how you implement yours with the resources you have available.
What we’ve seen work really well with our customers is that by offering employee benefits that can give back without changing much of their employees day-to-day or taking too much time has been really effective. In other words, rather than providing bonuses or salary increases (which happens naturally in most organizations anyway), offering employees benefits that they wouldn’t necessarily get otherwise keeps employees productive and engaged.
- Roll-over emergency savings
- No credit check loan programs
- Reward program for shopping at their regular stores
- Discounted prescriptions
- Payroll deducted programs
- Extra PTO horus for participating in employee benefits programs
There are a number of different ways to make financial incentive programs tangible without just increasing pay…
To learn more about TrueConnect’s Financial Wellness Platform, with access to financial advisors, emergency savings plans and loan options for your employees, click here.