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Which Employees Should Get Incentives?

It’s the giving season. Should you give everyone a shot at an incentive, or choose a select few (often higher-level) employees to reward?

As my multitudinous Twitter followers can attest, CFO has launched a holiday cubicle decorating contest. The winner, to be determined by a panel of partial judges (everybody at the company votes), receives a $200 American Express gift card. I like crafts and love the idea of brightening up our office during these drab months, so I might have participated no matter what. But it was the gift card that clinched it. Based on the fact that only two of my coworkers had decorated their desks, I was confident I could win. And who turns down $200?

Then I decided to join forces with my cube neighbor and fellow editor, Alissa Ponchione. One day last week, I enlisted Alissa on a trip to Jack’s, the all-purpose store next to our office on 45th Street in Manhattan. At the sight of garland, colored lights, and giant sparkly bows, she was hooked. But I like to think it was the teamwork that really drew her in. And now, here we are, talking smack about our coworkers, spending all our money on holiday decor and engaging in seasonal merriment.

CFO’s holiday decorating contest is what many would call an employee incentive. Incentives have been around for a long time, but companies are still trying to figure out how and when to dole them out. That’s true for CFOs in particular. The finance department is full of worker bees like me and Alissa, and they could use a little motivation (especially around this time of year). Maybe for the finance department, the stated goal is to accelerate collections, close the quarter before the deadline or cut costs. The broader goal of incentives might be to retain valuable employees.

There are a lot of things companies consider when designing an incentive program, but one of them stuck out to me. Should incentive programs be open to everyone in a particular department who wants to participate? Or should they be exclusive and targeted, with management singling out the best performers and giving them bonuses and perks?

Opinion_Bug7It seems logical that companies that want to retain employees would give incentives to specific people: the workers they really want to stick around. Indeed, Marc Newman, associate managing partner at Anchin, Block & Anchin, recommends that companies provide incentives to a handful of valued employees, typically mid-career, higher-level workers, rather than distribute them evenly. He says this approach allows companies to customize incentives and target them to the “small number of people that could have an impact at the company.” (Read: not the worker bees.)

For instance, employers could give deferred bonuses to a few workers. “Let’s say the company makes a million dollars and you have a 10 percent phantom-stock interest, so you get $100,000,” Newman says. “The company might say each year, ‘We’re going to give you half of that — $50,000 — but the other half we’re going to hold on to.’” Employers could tie the payout period to an employee’s needs. If a worker is going to have children in college in 15 years, the company could say, “We’re going to start to pay you that money once 15 years are up and your kids go to college” or to another employee, “once you’re 60 and you’re retirement age.” Personalizing the payout period is key, he says. “If you hold onto a piece of the money and give it to them at a later date, as long as they stay with the company, that really holds onto them.”

One thought on “Which Employees Should Get Incentives?

  1. I think the example of deferred comp over 15 years is a bad one. Somewhere between 3-5 years would have the desired effect to motivate and retain key staff.

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