Incentives May 2013

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Half day open training event for HR professionals and managers on the use of incentives in the workplace held in Toronto.

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Incentives May 2013

  1. 1. WII FM-the employee incentiveradio stationby Toronto Training and HRMay 2013
  2. 2. CONTENTS5-6 Definitions7-9 Purpose of incentive programs10-11 Types of incentives12-13 Dimensions of incentives14-15 Factors of incentive pay16-18 Principles of incentive pay19-20 Best practices for using incentives21-23 Executive incentives24-26 Conditions for effective use of incentive programs27-28 Caveats for administration of incentive programs29-30 Reasons for implementation31-32 Motives for profit sharing33-34 Possible conditions affecting the link between profit sharingand earnings35-36 Things to consider when designing incentive programs37-38 Concerns around incentive programs39-40 How and why incentive programs work41-42 Attendance incentives43-44 Types of incentive companies45-46 Measures to evaluate success47-48 The situation in Nigeria
  3. 3. Page 3Introduction
  4. 4. Page 4Introduction to Toronto Trainingand HRToronto Training and HR is a specialist training andhuman resources consultancy headed by Timothy Holden10 years in banking10 years in training and human resourcesFreelance practitioner since 2006The core services provided by Toronto Training and HRare:Training event designTraining event deliveryReducing costs, saving time plus improvingemployee engagement and moraleServices for job seekers
  5. 5. Page 5Definitions
  6. 6. Definitions• Bonuses• Incentives• Incentive schemes• Motivation• ProductivityPage 6
  7. 7. Page 7Purpose of incentiveprograms
  8. 8. Purpose of incentive programs1 of 2• Improve motivation• Tie pay to performance• Recognize differences inemployee performance• Increase competition amongemployees• Attract and retain productiveemployees• Reduce absenteeism• Reduce idle time• Reduce or control costsPage 8
  9. 9. Purpose of incentive programs2 of 2• Utilize equipment moreeffectively• Relate increases incompensation to increases inproductivity• Avoid additions to employees• Create uniform processingcosts• Direct efforts toward achievingorganizational objectivesPage 9
  10. 10. Page 10Types of incentives
  11. 11. Types of incentives• Natural• Artificial• Extrinsic• IntrinsicPage 11
  12. 12. Page 12Dimensions of incentives
  13. 13. Dimensions of incentives• What is being measured,inputs or outputs?• What period of performancedoes the payment reward?• Does the payment reward anindividual’s performance a ordoes it relate toteam/organizational success?• Is measurement based on asingle factor or a multiplefactor?• What form does the paymenttake?
  14. 14. Page 14Factors of incentive pay
  15. 15. Factors of incentive pay• Moral hazard• Adverse selection• Need to induce profitablecooperation in organizations• Need to counteract costly orunproductive institutionaland/or regulatory constraintsPage 15
  16. 16. Page 16Principles of incentive pay
  17. 17. Principles of incentive pay 1 of 2• Insurance• Rationality• Certainty equivalence• Dual performance measures• Risk premium• Intensity of incentives• Optimized performance• Efficiency in the evaluationbudget• InformativenessPage 17
  18. 18. Principles of incentive pay 2 of 2• Equal compensation intensity• Deferred compensation• Group compensationPage 18
  19. 19. Page 19Best practices for usingincentives
  20. 20. Best practices for using incentives• Achievable goals set by theemployee• Programming elements thataddress those goals• Programming that is directedto an incentive type• Utilizes both extrinsic andintrinsic reward structures• Rewarding behaviours, notoutcomesPage 20
  21. 21. Page 21Executive incentives
  22. 22. Executive incentives 1 of 2• Executives are risk-averse• Complexity and ambiguity destroyvalue• The longer you have to wait theless it is worth• It’s all relative-fairness isfundamental• People don’t just work for themoney• The key motivation of a long-termincentive plan is recognitionPage 22
  23. 23. Executive incentives 2 of 2• Performance pay has a cost-besure you are getting value• Keep it short, sweet and simple• One size does not fit all-know yourpeople and pay them accordingly• Money is only part of the deal-andrecognition matters as much asfinancial incentives• Be realistic about how variable paycan be from year to yearPage 23
  24. 24. Page 24Conditions for effectiveuse of incentive programs
  25. 25. Conditions for effective use ofincentive programs 1 of 2• Direct relationship betweeneffort and output• Readily identified units ofoutput• Even and continuous work flow• Standards of performance• Quality standards• Measurement systems• Opportunity for cost reduction• A good unit cost systemPage 25
  26. 26. Conditions for effective use ofincentive programs 2 of 2• Sufficient financial inducement• Reasonable time spans forpayment• Reliable stable technology• Selective application• Top management commitmentPage 26
  27. 27. Page 27Caveats for administrationof incentive programs
  28. 28. Caveats for administration ofincentive programs• Incentive punishes• Incentive schemes rupturerelationships• Incentive programs ignorereasons• Incentive schemes discouragerisk taking• Incentive schemes undermineintrinsic motivationPage 28
  29. 29. Page 29Reasons forimplementation
  30. 30. Reasons for implementation• Motivate employees• Increase sales• Increase brand exposure andawareness• Support product launch orpromotion• Increase customer loyalty• Attract new customersPage 30
  31. 31. Page 31Motives for profit sharing
  32. 32. Motives for profit sharing• The substitution argument• The human capital argument• The worker behaviourargumentPage 32
  33. 33. Page 33Possible conditions affectingthe link between profitsharing and earnings
  34. 34. Possible conditions affecting thelink between profit sharing andearnings• Employee participation indecision-making• Establishment size• Pre-existing compensationlevelsPage 34
  35. 35. Page 35Things to consider whendesigning incentiveprograms
  36. 36. Things to consider when designingincentive programs• Program cost• Return on investment• Ability to measure results• Program flexibility• Ease of use/time to administer• Recipient experience• Redemption rate• Brand exposurePage 36
  37. 37. Page 37Concerns around incentiveprograms
  38. 38. Concerns around incentiveprograms• Unethical actions• Pay inequality• Lower intrinsic motivationPage 38
  39. 39. Page 39How and why incentiveprograms work
  40. 40. How and why incentive programswork• Incentive programs improve performance• Incentive programs engage participants• Incentive programs attract qualityemployees• Long-term programs outperform short-term programs• Executives and employees value beingrewarded• Quota-based rewards programs work bestPage 40
  41. 41. Page 41Attendance incentives
  42. 42. Attendance incentives• Attendance bonuses• Lotteries• Adjustments to profit-sharing• Well-pay plans• Group-based approachesPage 42
  43. 43. Page 43Types of incentivecompanies
  44. 44. Types of incentive companies• Full-service performanceimprovement companies• Full-service incentivecompanies• Incentive fulfillmentcompaniesPage 44
  45. 45. Page 45Measures to evaluatesuccess
  46. 46. Measures to evaluate success• Employee retention• Performance improvement• ROI• Sales increase• Media coverage• Brand exposurePage 46
  47. 47. Page 47The situation in Nigeria
  48. 48. The situation in Nigeria• Financial and non-financialcomponents of compensation• Relevant incentive programs• Type of incentives that do exist• What should managers doPage 48
  49. 49. Page 49Conclusion and questions
  50. 50. Page 50Conclusion and questionsSummaryVideosQuestions

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