Over the past several years, I have seen a growing trend where businesses have started investing in cool workplace incentives to try to attract and retain talented workers. Some companies are totally nailing it (think Google and Moz), but others are still struggling to create the type of work environment their employees really want.

The difference is that companies with successful incentives programs know why they are offering certain benefits. Others just choose perks they think sound cool, without really understanding the reasons those perks appeal (or perhaps don’t appeal) to the type of employee they want to attract.

The team at Company Folders has created a list of the top ten workplace perks and why they matter to help you create your own incentives program for 2017. You’ll learn what appeals to your team’s specific interests, rather just jumping on a trend for the trend’s sake. Continue reading

Thanks to my wonderful wife for the idea for this one. 

jelly-month-club-christmas-vacationOne of our traditions every year is to watch Christmas Vacation (no, not with the kids!) While it’s not my favorite (that spot is held by It’s a Wonderful Life), it always gives me a laugh and reminds me to focus on the important things during the Christmas season.

One of the memorable scenes in the movie is when Clark opens up what he expects to be a holiday bonus only to find a “jelly of the month” membership card. After all kinds of crazy experiences, that bonus was his last opportunity to bring some sense of closure to the season by giving an amazing gift to his family (a pool). When he finds out that it’s basically a certificate for twelve free jars of jelly, he snaps, ranting and raving about his boss, the company, and more.

I’ve been a key part of many compensation and bonus reviews over the years, and there are some excellent lessons we can all learn from this story.

Expectations Matter

During the movie, Clark talks with a friend about his big plan to put in a pool. He even carries around a brochure to look at and share when necessary, demonstrating how excited he is about the coming bonus. The reason he ultimately flips out at the end of the movie is because his expectations did not match reality.

The parallel is obvious. If we are going to provide some sort of bonus, whether holiday-related or not, we should ensure that expectations match reality. You can do some prep work, laying the foundation and expectations beforehand to ensure nobody is disappointed (or at least a minumum of disappointment occurs, because it’s hard to please everyone).

At a previous employer, my colleagues and I worked on an annual conference that required dozens of hours of preparation and delivery work. The first year we each got a very small gift card as a reward, and the second year we got nothing at all, despite the event making hundreds of thousands of dollars in profit. How long do you think a company like that will have an engaged, productive workforce? Hmmm…

Value Should Mirror Contributions

In Christmas Vacation, Clark is particularly excited because his work performance was recently recognized as above average. He created a valuable product for his employer, and he expected his bonus to mirror that level of contributions.

When it comes to offering rewards, recognition, and bonuses for performance and results, be sure the result is related to the level of the employee’s contribution. Someone saved the company $2 million by reducing waste? Don’t give them a $25 gift card and call it a day. An employee creates a new process that reduces customer churn by 10%? They expect more than a pat on the back and a template “thank you” note.

This isn’t an invitation to be overly extravagant, but think about it this way: do you want those people to continue innovating and creating new value for the company? If so, reward them well, and create a virtuous cycle of value for everyone involved.

Discriminate. Heavily.

We’ve been drilled that discrimination is a bad thing. In reality, discrimination is wonderful–it’s illegal discrimination that needs to be eliminated. Some of your employees are going to do their jobs and go home, never adding more value or creating unique opportunities for growth. While those people need some sort of recognition for getting the job done, the ones that create more value need to be treated differently. As I mentioned in my post about how to hire and manage creative people:

Whatever label we stick on them, we need to treat them differently from the rest of the employees. Yes, this scares the pants off most HR pros, because we’ve been taught to treat everyone the same. But it’s madness when you think about it. Equal treatment for unequal performance/productivity/contributions is a surefire path to mediocrity.

When I managed compensation reviews, it always drove me crazy to see our highest performers getting a 4-5% raise and our lowest performers getting a 2-3% raise. That ~2% split wasn’t enough to truly reward our great people and create an incentive for continued stellar performance. My only consolation was the bonus pool that I was able to help work with managers to direct more toward those individuals that offered more than their “fair share” of value to the company.

Public or Private Praise?

The examples we’ve been discussing don’t have to include a moment of public praise, but they certainly could. Here’s a story I’ve told before about two very different methods for showing appreciation for the contributions of an employee or team.

Presenting work awards is one part of the employee recognition process. If you are going through the trouble to nominate someone, process the paperwork, and get them an award, wouldn’t you like people to know about it? Apparently not everyone believes that. Here’s an example of the wrong way to value the contributions of your people:

I was talking to a friend recently and heard this sad story. A handful of employees received awards for superior performance. It was the first time the work group had received awards, so it was a special occasion for the staff members who earned the kudos. However, the manager quickly stepped in and made it known that the awards were not to be communicated internally. Nobody could know that the employees had been rewarded for their efforts.

My take on that situation is multifaceted. First, the manager is missing out on a great opportunity to share about their people. Point out how well they did and encourage others to do the same (or better). And the people who received the awards? You could have given them half as much money and public praise would have made up the difference. Praise has significant value when people don’t receive it often (not that you should withhold it just to make them appreciate it more!)

So, what’s a better way to wrap in public praise without making it awkward? Here is how I liked to do it when I managed a corporate HR function.

One year we had a major corporate office relocation, and it was quite an ordeal. After the dust had settled, the team who made the move possible all received financial awards as a “thank you” for all the hard work, but we wanted to make sure it was more meaningful. Check out the email below that went out as the public praise for the team.

—–

We’ve talked about it before, but recently the corporate office moved to a new location. On the outside, it was a fairly simple affair; however, from the inside there was an astounding amount of work that had to be completed. Not to be dissuaded, a few people really stepped in to make that transition as easy as possible. They picked up extra duties, worked long hours, and fought the good fight with vendors and builders to make sure this space was everything we needed it to be.

For their efforts, each of the employees mentioned below received an award as a token of appreciation; we wanted to offer this bit of public praise as well. To those of you who made it all possible, we all appreciate you very much.

(Employee names removed for this post)

Thank you for your support! You truly embody our core value of Unequivocal Excellence in your work.

—–

At the end of the day, it’s critical to believe that your employees want to do great work. And in your role as an HR/talent leader, it’s crucial for you to coach managers, offer tools and guidance, and help create opportunities for people to be recognized for what they do. I can guarantee that they won’t be disappointed like our dear friend Clark.

How do you make sure your people feel appreciated and rewarded for their work? Do you have a unique way of making it personal and appealing for the recipient? 

monetary rewardsLast week I was talking with some folks about using compensation to drive employee behavior, and it occurred to me that I have never shared anything about that topic here. While I might not be the world’s foremost expert on the topic, I do have a few basic principles that I have relied on over time. The thing that I would like to note is that these apply to organizations of virtually any size. Even small companies (I’m looking at you, Mr/Ms HR Manager of a company with less than 250 employees) can incorporate these elements into their compensation planning without too much stress.

The other caveat I want to mention up front: money is not always a motivator for everyone. We want to instantly think that we can drive performance or discourage behaviors through monetary incentives. While that may be the case at times, it’s also worth noting that we humans are unpredictable creatures. That’s why motivation discussions are based on theory, not law. We have laws of physics. We have theories of motivation. Keep that in mind. If you implement something we talk about today and it doesn’t work, feel free to change it. It’s about finding what works for your organization and your people.

Everyone Needs a Variable Element

When it comes to compensation we have two basic elements: base pay and variable pay. Base pay is what someone earns as a condition of their employment. The fun comes when we start talking about variable pay, its elements, and how to use those pieces to really drive the behaviors we’re looking for in the workplace.

The most common area we see this in is for sales professionals. Base+Commission is the longstanding model, and it’s fairly easy to understand. What’s more difficult is figuring out how that sort of structure applies to other professionals, such as engineers, accountants, clerical staff, or even HR. How can you implement that?

A Few Types of Variable Pay

So, what types of variable pay might you commonly see? Here are a few:

  • Bonuses
  • Profit sharing
  • Deferred compensation
  • Group incentives

Each of these types can be combined and/or configured in a wide variety of ways to target specific jobs, types of workers, and even company culture. Test, measure, and revise as necessary.

How to Afford It

One of the first hurdles I always face when it comes to getting management on board with a compensation change is pretty obvious:

Can we afford it?

The good thing about incentive compensation that is tied to performance metrics like sales or profitability is yes, you can afford it. Here’s a good illustration for how that works.

Imagine that your friend has a lemonade stand valued at $5,000 that you want to purchase. You could go out and get a loan for $5,000 to buy it, but that increases your risk (what if you don’t have the cash flow to make the payments?) and jeopardizes the future operation of the business. The smarter, and less risky, way is to negotiate a purchase price that comes from periodic payments of net profits. If your net profit runs $1,000 per year, you’ll pay for the business over five years, but you are not at risk if there is a downturn in the market–it just takes longer for the final payoff. 

Variable compensation tied to business performance is the same thing. You are only on the hook for paying out when the business performance is good enough to cover the increased compensation costs.

This is identical to the fixed/variable cost discussion as it pertains to economics as well. Your fixed costs (base pay) will be there always. The variable costs/compensation will only be applicable if certain conditions are met. That, my friends, is how you afford it. You structure the incentives so that the growth in revenue/sales/profit/productivity/whatever-you-choose is enough to cover the cost of the incentive compensation.

This Hinges on Performance

If you haven’t already figured it out, this setup is going to require something that might not already be in place. We have to be able to properly measure performance for our staff in order to compensate them appropriately. If you’re not willing to measure performance and hold people accountable for it, then you might as well scrap this whole incentive compensation thing before you even start.

But if you are willing, then you need to try to find some objective metrics to tie into the jobs you’re trying to create incentives for. That’s a whole other discussion for another day, but in the initial planning and setup you’ll need to determine those performance objectives, because those are the basis for who earns variable compensation, how much they earn, when they earn it, etc. This is important, because you have to be offering incentives for the right thing.

It’s easy to focus on rewarding people for following the process instead of rewarding them for actually achieving the desired results. Be careful about that common trap.

Check out the free employee performance management guide for more on the whole performance topic, if you’re interested.

Shorten the Distance

There are two things that I have observed with incentive compensation that really help to drive results, and they have to do with control and reaction time.

If you can shorten the distance so employees have more control and a shorter reaction time, the rewards will be more meaningful.

Money Isn’t Everything

As I wrote about a while back, there are some great things that motivate people at work other than money. Sometimes it’s easier to assume money will work in all cases, but it’s often a more complex arrangement of details that ultimately drives people to do (or not do) things at work.

Do you currently use incentive based pay? How is it working for you? What types of positions do you use it for? 

Think you can offer incentives or rewards long after the fact and it won’t affect the results? Here’s a story I’ve been watching closely that disputes the idea that timing isn’t a major factor in decision making (even for nine year olds).

My wife is a teacher (and a darn good one). One of the things she has done in her classroom is to offer special lunches to students who hit their reading goals. Those special lunches involve me bringing them something from Chick-Fil-A (a Southern delicacy!) on the Friday immediately after they reach their goal.

But it wasn’t always that way.

For the first half of the school year, the agreement was that if the students read their goal amount, then I would bring food at the end of the grading period. That could take up to nine weeks (if the kid’s a fast reader), and that’s like infinity in a child’s eyes. While she had a few kids read their books, most of them did not.

A new, better way

Then, this half of the school year, we’ve done it differently. Instead of waiting until the grading period is over (up to nine weeks), she gives them the reward less than seven days after they meet their goals. This has had a few effects on the process.

  1. It lets the other kids (in the midst of their own progress) see the tangible reward and encourages them to reach their own goals.
  2. It keeps the process high on everyone’s radar by making a reference every week or so.
  3. The kids who reach their goals and get rewarded? There is a 100% goal completion for kids who met their rewards in previous sessions (in other words, they are repeaters).
  4. There are significantly more students who reach their goal amounts on this new system (more than twice as many, I’d say).

I love the process of continuous improvement and how my wife can see something like this changing how the students are engaged in their reading program. Next year she can tweak it a little more and see if those numbers get even higher, but it’s nice to start off with something you know that works.

What it means for you

Thinking about offering rewards or incentives to your workforce? Make sure you don’t ignore the time element. It can help (or hurt) you in more ways than you might imagine.