Employee Rewards Programs: The Formula for Successful Rewards

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Matt Lundy is co-owner of Rewarding Events & Incentives (REI), a full service incentive agency specializing in the creation and fulfillment of programs to motivate and reward employees, customers and distribution channels. for achieving specific goals. Rewarding Events & Incentives was recently announced as one of nine SBA award winners in Louisiana for 2009 .

A graduate of St. John’s University in NY, Mr. Lundy is very active in the local business community, serving on the Boards of both the Jefferson and River Region Chambers of Commerce, and is a member of HRMA New Orleans, the Louisiana Technology Council (LTC), the St. Charles Business Association and Entrepreneur’s Organization (EO).

The presentation will cover how you build a budget, common mistakes and how to avoid them, selecting the right reward option for your program and more.

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Employee Rewards Programs: The Formula for Successful Rewards

  1. 1. Employee Reward Programs: The Formula for Successful Rewards<br />Presented by Matt Lundy<br />Rewarding Events & Incentives<br />
  2. 2. INCENTIVE Definition<br /><ul><li>That which moves or influences the mind, or operates on the passions.
  3. 3. That which incites, or has a tendency to incite to action.
  4. 4. An additional payment (or other remuneration) to employees as a means of increasing output.</li></li></ul><li><ul><li>The action of recognizing or the state of being recognized.
  5. 5. Special notice or attention </li></ul>RECOGNITION Definition <br />
  6. 6. RECOGNITION<br /><ul><li>Thanks for doing “x”
  7. 7. Occurs after the fact</li></ul>INCENTIVES<br /><ul><li>IF you achieve “x” , you’ll earn “y”
  8. 8. Occurs before the fact</li></ul>INCENTIVES vs. RECOGNITION<br />
  9. 9. <ul><li>Last year American companies spent $50,000,000,000 on merchandise and travel incentives and that doesn’t count the monetary payouts that are untrackable.
  10. 10. “There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and financial success”</li></ul>The Science Behind Incentives<br />
  11. 11. Maslow’s Hierarchy of Needs<br />
  12. 12. The Bell Curve<br />
  13. 13. Productivity Gains<br />
  14. 14. <ul><li>99% of employees say it’s important to be recognized for good work(Websurveyor, 2002)
  15. 15. 85% of employees feel overworked and underappreciated (Dr. Robert Cooper, 2005)
  16. 16. 75% of employees say they could be more effective in their jobs (Public Agenda Forum, 2004)
  17. 17. 70% of unhappy customers abandon vendors because of poor service(Forum Corp, 2003)</li></ul>NUMBERS THAT MATTER<br />
  18. 18. <ul><li>Sales
  19. 19. Customer Service
  20. 20. Safety
  21. 21. Health & Wellness
  22. 22. Process Improvement</li></ul>Any aspect of your business…<br />
  23. 23. What you <br />re-enforce is<br />what you get<br />Incentive RULE # 1<br />
  24. 24. STEP 1: Identify Objectives <br />STEP 2: Define Target Audience <br />STEP 3:Build Your Budget <br />STEP 4: Develop Program Structure <br />STEP 5: Designate Program Administrator <br />STEP 6:Select Rewards and Presentation <br />STEP 7: Promote The Program <br />STEP 8: Track The Program <br />STEP 9: Distribute Awards and Celebrate Success <br />STEP 10: Evaluate and Communicate Results <br />The Process<br />
  25. 25. 1) Incentive programs do not reward<br />expected or average performance.<br />2 ) You only reward achievement of<br />specific, measurable goals. <br />Have to measure <br />Have to be specific<br />Budget Foundations<br />
  26. 26. Upfront Costs<br />Program Launch Event<br />Communication Pieces, mailers/posters<br />Promotional items<br />Dedicated website<br />Ongoing Costs<br />Program Administration<br />Ongoing communications <br />Rewards<br />More than Rewards<br />
  27. 27. An incentive program is funded by extra profit from increased sales or cost savings. <br />In essence, you are trading a portion of the additional profit that you currently do not have. You are giving up a piece of future earnings that you hope to achieve.<br />What does self-funding really mean? <br />
  28. 28. Look at your best employee in that job/role<br />What makes them your best? <br />What are the measurable characteristics?<br />That “best” person should be your highest rewarded employee in a well designed program. <br />Not sure how to Quantify?<br />
  29. 29. What you <br />re-enforce is<br />what you get<br />Incentive RULE # 1<br />
  30. 30. Objective vs. Subjective<br />Objectively. . .<br />Company goals <br />Payout rates <br />Return on investment <br />Budgetary constraints <br />Subjectively . . . <br />Is the earning opportunity significant enough to generate the desired results? <br />Is the program the right length to achieve the goals and hold participant interest? <br />
  31. 31. Open End <br /> 1) Unknown number of potential winners<br /> 2) Anyone who “hits the goal” gets rewarded<br /> 3) Hard to budget for / maximum impact<br />Closed End<br /> 1) Known number of potential winners<br /> 2) Only top “10” get rewarded<br /> 3) Easy to budget for / less impact<br />Open End vs. Closed End<br />
  32. 32. Dilbert<br />
  33. 33. 1) What do you expect to attain in incremental dollars? (This is from increased sales, improved safety (lower insurance, time loss etc.)<br />2) Assign a percentage of that to pay for the incentive program; 10 - 40%, depending on the program.<br />3) Of that, a traditional breakdown would be 5-10% for administration, 10-20% for communication and launch, and the remainder for rewards.<br />Nuts & Bolts<br />
  34. 34. If your program is longer than six months, reward potential should represent between 6% and 10% of a participant&apos;s salary.<br /> If your program is shorter, say 60 to 90 days, consider providing participants with the opportunity to earn rewards valued between 3% to 5% of their salary<br />Traditionally…<br />
  35. 35. <ul><li>Your program = your rules
  36. 36. You balance the reward vs. the increased productivity or cost savings
  37. 37. Good programs pay for themselves
  38. 38. No achievement of goals = NO payout
  39. 39. The budget is already there in most cases, it’s just going to an insurance company or lost in low productivity</li></ul>The “Cost” of Incentives<br />
  40. 40. Some art, some science<br />Look at your demographics, what works for your culture and audience?<br />If you ask people what they want they will tell you 100% of the time - they want money.<br />They say money, because they really want the choice of how to spend it.<br />Picking the right rewards<br />
  41. 41. <ul><li>Research has demonstrated repeatedly, cash rewards don't motivate extra effort
  42. 42. Cash is thought of as compensation and is spent on necessities. 
  43. 43. In a recent survey people were asked how they spent their last cash reward. The top 4 responses were:
  44. 44. Bills - 29%
  45. 45. Do not remember - 18%
  46. 46. Never received cash reward – 15%
  47. 47. Household items - 11%
  48. 48. CASH HAS NO VALUE TO THE SPONSORING COMPANY</li></ul>MONEY<br />
  49. 49. Money<br />Stored Value Cards<br />VISA or AMEX Cards loaded once with a specific dollar value (use it and lose it)<br />Custom VISA Cards that are reloadable<br />Restaurant and Retail Gift Cards<br />Merchandise<br />Brand Name<br />Imprinted / Promotional Merchandise<br />Travel<br />Reward Options<br />
  50. 50. Tough to change that<br />Custom debit cards<br />Keeps funds out of the checking account<br />They see your name when they spend the money<br />If you are giving Money…<br />
  51. 51. No Fee Gift Cards<br />
  52. 52. MERCHANDISE<br />Visibility of the reward – every time you use it you remember where it came from<br />You can brag about merchandise while it’s not cool to brag about $$<br />Stronger link to sponsor company than something you went out and purchased<br />Online Catalogs today that are totally customizable<br />Choice is critical to participants<br />
  53. 53.
  54. 54. Great reward - creates memories and unique experiences for participants<br />I saw grown men turn into little boys at the Superbowl and the Masters<br />Drawbacks are that they are expensive and take your top performers out of the office<br />Also fewer companies want their top performers in the same place or on the same plane<br />TRAVEL<br />
  55. 55. Cash – covered that<br />The Contest with 1 or 2 winners<br />Group goals w/o individual element<br />Unrealistic Goals<br />Goals set w/o employee input<br />Was the reward worth the effort?<br />Who got to choose the reward?<br />Gray areas – subjective calls<br />Failure to communicate<br />Common Mistakes<br />
  56. 56. Were the rules of the program communicated effectively to the participants? Everybody enrolled in the program must know precisely what&apos;s expected of them during the course of the program.<br />Did you keep your participants aware of their progress throughout the program period? If not, they probably lost interest somewhere along the way. Participants tend to contribute extra effort when they know they&apos;re close to a reward.<br />Communication<br />
  57. 57. Communicate – talk to your employees<br />Do they have what they need?<br />Is there a better way to do their job?<br />Are all existing programs aligned with company goals?<br />Do employees know your company goals?<br />Do employees know their part in the whole?<br />Survey them - Small companies are terrified to ask, because they may actually have to do something.<br />Things you can do today <br />
  58. 58. <ul><li>Process Improvement / Safety Committees
  59. 59. Titles – Director of first impressions
  60. 60. SME – subject matter expert
  61. 61. Mentors
  62. 62. Time Off / Flex time
  63. 63. Sports Tickets
  64. 64. Day at the Spa
  65. 65. Sponsor company teams – bowling, volleyball, softball etc. team building outside the office
  66. 66. Golf Tournament Sponsor – Invite top performers or customers</li></ul>Recognition – Make it Public<br />
  67. 67. OFFICE SPACE<br />Peter Gibbons: It&apos;s a problem of motivation, all right? Now if I work my butt off and Initech ships a few extra units, I don&apos;t see another dime; so where&apos;s the motivation? And I have eight different bosses right now. So that means that when I make a mistake, I have eight different people coming by to tell me about it. That&apos;s my only real motivation - not to be hassled; that, and the fear of losing my job. But you know, Bob that will only make someone work just hard enough not to get fired.<br />So if you are getting this…<br />
  68. 68. But Really want this…<br />
  69. 69. Increased Sales<br />Increased Loyalty - Reduced Employee Turnover<br />Increased Safety<br />Process Improvements Implemented – costs savings<br />Improved Customer Service Ratings<br />Better Trained Employees<br />Employees who treat it like their own business<br />Benefits of Incentives<br />
  70. 70. It costs between 5 and 7 times more to find a new customer than to retain one (S&MM, August 2006)<br />A 5% reduction in lost customers can increase profits by up to 75% (S&MM, August 2006)<br />Domino’s Pizza and Ford Motor estimate a loyal customer is worth $5000 over 10 years, and $142,000 over their lifetime (S&MM, August 2006)<br />67% of consumers change their place of business for little or no reason (S&MM, August 2006)<br />Customers<br />
  71. 71. quick and easy things<br />Referral Program<br />Robust POS system can create your own gift cards.<br />POS can track customers purchases<br />Send a personal hand written thank you<br />Customers<br />
  72. 72. “There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and financial success” – Forum Corp. 2005<br />
  73. 73. CULTURE SHIFT<br />Show of hands, how many of you have any of<br />the following?<br />Winn Dixie or Save a Center card<br />Frequent Flier clubs?<br />Points on credit or debit cards<br />Points on Hotel stays<br />Points on Car Rentals<br />Points on Starbucks<br />So do your employees<br />

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