Employee Rewards Programs: The Formula for Successful Rewards

Employee Reward Programs: The Formula for Successful Rewards
Presented by Matt Lundy
Rewarding Events & Incentives

INCENTIVE Definition

That which moves or influences the mind, or operates on the passions.
That which incites, or has a tendency to incite to action.
An additional payment (or other remuneration) to employees as a means of increasing output.

The action of recognizing or the state of being recognized.
Special notice or attention

RECOGNITION Definition

RECOGNITION

Thanks for doing “x”
Occurs after the fact

INCENTIVES

IF you achieve “x” , you’ll earn “y”
Occurs before the fact

INCENTIVES vs. RECOGNITION

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.
“There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and financial success”

The Science Behind Incentives

Maslow’s Hierarchy of Needs

The Bell Curve

Productivity Gains

99% of employees say it’s important to be recognized for good work(Websurveyor, 2002)
85% of employees feel overworked and underappreciated (Dr. Robert Cooper, 2005)
75% of employees say they could be more effective in their jobs (Public Agenda Forum, 2004)
70% of unhappy customers abandon vendors because of poor service(Forum Corp, 2003)

NUMBERS THAT MATTER

Sales
Customer Service
Safety
Health & Wellness
Process Improvement

Any aspect of your business…

What you
re-enforce is
what you get
Incentive RULE # 1

STEP 1: Identify Objectives
STEP 2: Define Target Audience
STEP 3:Build Your Budget
STEP 4: Develop Program Structure
STEP 5: Designate Program Administrator
STEP 6:Select Rewards and Presentation
STEP 7: Promote The Program
STEP 8: Track The Program
STEP 9: Distribute Awards and Celebrate Success
STEP 10: Evaluate and Communicate Results
The Process

1) Incentive programs do not reward
expected or average performance.
2 ) You only reward achievement of
specific, measurable goals.
Have to measure
Have to be specific
Budget Foundations

Upfront Costs
Program Launch Event
Communication Pieces, mailers/posters
Promotional items
Dedicated website
Ongoing Costs
Program Administration
Ongoing communications
Rewards
More than Rewards

An incentive program is funded by extra profit from increased sales or cost savings.
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.
What does self-funding really mean?

Look at your best employee in that job/role
What makes them your best?
What are the measurable characteristics?
That “best” person should be your highest rewarded employee in a well designed program.
Not sure how to Quantify?

What you
re-enforce is
what you get
Incentive RULE # 1

Objective vs. Subjective
Objectively. . .
Company goals
Payout rates
Return on investment
Budgetary constraints
Subjectively . . .
Is the earning opportunity significant enough to generate the desired results?
Is the program the right length to achieve the goals and hold participant interest?

Open End
1) Unknown number of potential winners
2) Anyone who “hits the goal” gets rewarded
3) Hard to budget for / maximum impact
Closed End
1) Known number of potential winners
2) Only top “10” get rewarded
3) Easy to budget for / less impact
Open End vs. Closed End

Dilbert

1) What do you expect to attain in incremental dollars? (This is from increased sales, improved safety (lower insurance, time loss etc.)
2) Assign a percentage of that to pay for the incentive program; 10 - 40%, depending on the program.
3) Of that, a traditional breakdown would be 5-10% for administration, 10-20% for communication and launch, and the remainder for rewards.
Nuts & Bolts

If your program is longer than six months, reward potential should represent between 6% and 10% of a participant's salary.
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
Traditionally…

Your program = your rules
You balance the reward vs. the increased productivity or cost savings
Good programs pay for themselves
No achievement of goals = NO payout
The budget is already there in most cases, it’s just going to an insurance company or lost in low productivity

The “Cost” of Incentives

Some art, some science
Look at your demographics, what works for your culture and audience?
If you ask people what they want they will tell you 100% of the time - they want money.
They say money, because they really want the choice of how to spend it.
Picking the right rewards

Research has demonstrated repeatedly, cash rewards don't motivate extra effort
Cash is thought of as compensation and is spent on necessities.
In a recent survey people were asked how they spent their last cash reward. The top 4 responses were:
Bills - 29%
Do not remember - 18%
Never received cash reward – 15%
Household items - 11%
CASH HAS NO VALUE TO THE SPONSORING COMPANY

MONEY

Money
Stored Value Cards
VISA or AMEX Cards loaded once with a specific dollar value (use it and lose it)
Custom VISA Cards that are reloadable
Restaurant and Retail Gift Cards
Merchandise
Brand Name
Imprinted / Promotional Merchandise
Travel
Reward Options

Tough to change that
Custom debit cards
Keeps funds out of the checking account
They see your name when they spend the money
If you are giving Money…

No Fee Gift Cards

MERCHANDISE
Visibility of the reward – every time you use it you remember where it came from
You can brag about merchandise while it’s not cool to brag about $$
Stronger link to sponsor company than something you went out and purchased
Online Catalogs today that are totally customizable
Choice is critical to participants

Great reward - creates memories and unique experiences for participants
I saw grown men turn into little boys at the Superbowl and the Masters
Drawbacks are that they are expensive and take your top performers out of the office
Also fewer companies want their top performers in the same place or on the same plane
TRAVEL

Cash – covered that
The Contest with 1 or 2 winners
Group goals w/o individual element
Unrealistic Goals
Goals set w/o employee input
Was the reward worth the effort?
Who got to choose the reward?
Gray areas – subjective calls
Failure to communicate
Common Mistakes

Were the rules of the program communicated effectively to the participants? Everybody enrolled in the program must know precisely what's expected of them during the course of the program.
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're close to a reward.
Communication

Communicate – talk to your employees
Do they have what they need?
Is there a better way to do their job?
Are all existing programs aligned with company goals?
Do employees know your company goals?
Do employees know their part in the whole?
Survey them - Small companies are terrified to ask, because they may actually have to do something.
Things you can do today

Process Improvement / Safety Committees
Titles – Director of first impressions
SME – subject matter expert
Mentors
Time Off / Flex time
Sports Tickets
Day at the Spa
Sponsor company teams – bowling, volleyball, softball etc. team building outside the office
Golf Tournament Sponsor – Invite top performers or customers

Recognition – Make it Public

OFFICE SPACE
Peter Gibbons: It's a problem of motivation, all right? Now if I work my butt off and Initech ships a few extra units, I don't see another dime; so where'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'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.
So if you are getting this…

But Really want this…

Increased Sales
Increased Loyalty - Reduced Employee Turnover
Increased Safety
Process Improvements Implemented – costs savings
Improved Customer Service Ratings
Better Trained Employees
Employees who treat it like their own business
Benefits of Incentives

It costs between 5 and 7 times more to find a new customer than to retain one (S&MM, August 2006)
A 5% reduction in lost customers can increase profits by up to 75% (S&MM, August 2006)
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)
67% of consumers change their place of business for little or no reason (S&MM, August 2006)
Customers

quick and easy things
Referral Program
Robust POS system can create your own gift cards.
POS can track customers purchases
Send a personal hand written thank you
Customers

“There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and financial success” – Forum Corp. 2005

CULTURE SHIFT
Show of hands, how many of you have any of
the following?
Winn Dixie or Save a Center card
Frequent Flier clubs?
Points on credit or debit cards
Points on Hotel stays
Points on Car Rentals
Points on Starbucks
So do your employees