April 25, 2023

Do Employee Incentives Work?

Employee incentives, the rewarding of work performance, loyalty, innovative ideas, and sales excellence, are used by more than half of American companies.

Employee Incentives- what’s the deal?

According to the Incentive Research Foundation, Incentives such as trips, awards, and cash might kickstart staff excitement and productivity in the short term. However, research has found that producing lasting change in employee behavior doesn’t come so easy, and in fact, once the incentives are removed, employees will go back to doing things the way they always have in the past.


That’s because long-term change will come from employees that have a passion for their work and a drive to improve the company. Matching staff skills to the appropriate jobs and providing regular opportunities for keeping employees engaged is probably more likely to get results than any type of pay-for-performance incentive program.

The long and short of it is that incentives can work but often times they don’t have a lasting impact and may even reward the wrong behavior. To be effective, incentives need to be personalized. Different employees have different motivators. The best incentives tap into intrinsic motivation rather than extrinsic motivation.

So let’s say you still want to retain your incentive program or even start one to see how it goes. Ensuring program effectiveness will be better achieved by following the below recommendations supported by ongoing research in the area:

Recommendations for Designing an Effective Incentive Strategy

Step 1: Identify Specific Goals

Carefully identify what the objective is for your organization. Simply wanting to increase ideas, or increase revenue is not specific enough. Incentive programs can easily fail because they are not tied to specific goals. If a small business owner would like to increase the number of innovative ideas coming from employees, he should first decide what constitutes an “innovative idea.” In other words, the incentive should not just be to have an idea. Rather, it should be an idea that has been carefully thought out and supported by a process that leads to a high likelihood of success. This would require the employees to perform research and testing (or working with necessary departments to perform these functions) before being rewarded.

Step 2: Identify Motivators and Match Them To Incentives

As mentioned, employees have different motivators, and an employer must put in place processes for understanding these motivations. At large organizations, leaders could meet regularly with departments and managers to understand the needs of the groups they supervise, or you could conduct a company-wide survey. At smaller organizations, owners can plan regular meetings with employees to learn about motivators. It sounds simple, but sometimes just asking employees what they would like will go a long way to understanding how to maximize their motivation.

We’ll break it down

For example, if several employees are motivated by monetary incentives, those employees could work on a project together where a monetary bonus is offered for successful completion. If you have a group of employees that have a high level of passion and commitment to the job and appear to be intrinsically motivated, things like a company-wide announcement describing their contribution could work. Maybe even an article featuring the successful project in a local newspaper that references the employees that contributed could prove to be very motivating for that group.

Step 3: Continually Evaluate Performance

Even the best employees can go through periods of low performance if they are not continually engaged and motivated. It’s important to find opportunities for each employee to tap into his or her unique skill sets so that the employee is able to motivate themselves. If performance continues to be an issue for an employee, employers should examine if they are in the right role.

Overall, the most effective incentive programs promote specific actions for a targeted audience to achieve measurable outcomes. Rethinking how you structure your incentives could go a long way toward getting the results you want.

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