Having a happy and engaged workforce is the ultimate dream scenario for any organization. Along with offering benefits, perks and recognition, implementing an employee incentive program can take employee performance to the next level.

Simply put, an employee incentive program rewards an employee for producing targeted results. According to SHRM, an employee incentive program can enhance recruitment, engagement, retention and employer branding.

5 Tips for Building a Successful Employee Incentive Program

Decide on Compensation

One of the biggest considerations to make is how you will compensate your employees once they reach the incentive program’s goal. Money, of course, is one option, which includes raises, bonuses and profit-sharing, but compensation can also include recognition, gifts or company parties. You’ll have to decide what type of compensation will be best fit for your program. If budget constraints are keeping you from compensating with money, consider that incentive programs help to improve productivity which can positively impact your bottom line.

Make it Easy

Your employees won’t be satisfied with an incentive program they can’t understand or requires them to jump through hoop after hoop before achieving their goal. Incentive plans should focus on near-term goal that everybody understands. They should be transparent with one objective, i.e., hit a target, receive a payout. Simple criteria commonly includes job category, length of service, job classification and the goal of the incentive, according to SHRM. Once you set your criteria, HR needs to clearly communicate the program to employees so they understand how it works and will trust once they reach the goal they will be rewarded.


Allow Employees to Control the Outcome

An incentive program needs to rely on the employee’s performance to be effective. Discretionary bonuses, those that rely on a manager’s decision, demotivate employees and end up making recruiting, motivating and retaining top talent challenging. Your employees must be able to actually achieve the goal as well. SHRM advises that if your employees don’t believe the goals are realistic, and they’ll benefit financially from their employer’s success, the plan will be doomed.

Align with Company Objectives

According to the Small Business Chronicle, the key to any employee incentive plan is to align it with the company’s objectives so employees are rewarded when the company is near or above its goal. And those performance objectives should be tied to the business’ overall strategy, vision and purpose whether it is meeting a quarterly sales goal, setting a safety record or having a highly profitable year. The Business Journal reports, that if it is in a mission statement, it’s important enough to focus on an incentive program.

Reassess the Value Often

Building an incentive plan is not a one-and-done process. These plans should be reassessed often to ensure they are serving their purpose. If you build an incentive plan that starts showing low participation, the program likely isn’t engaging or, even worse, could indicate a culture of low-participation in your workforce as a whole. Continually ask your employees what they think of the incentive program, especially for outgoing employees. Get feedback and make changes so your program always has value for your employees.

A performance management system helps you evaluate your employees so you know how and when you should reward them with an incentive program. BirdDogHR offers a smart Performance Management System that has customizable reviews so managers can thoroughly evaluate employees and promote specific practices to not only let employees know they’re on a clear career path for your incentive program but within the organization itself.