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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?

Companies could also give out equity grants, which allow employees to own part of the firm. But Newman says firms should reserve equity for employees they know really well, because a new partner would likely want to change the way a firm makes decisions. “It could take years to get to know them, see how they perform and what their aspirations are, and if you really want them as a partner,” he says.

But Heath Suddleson, speaker and author at Executive Achievement, a leadership coaching firm, says companies should give all employees a chance to reap rewards, not limit the bonus to a handful of people or hand out secret bonuses to valued employees behind closed doors. Indeed, targeting incentives to higher-level employees is problematic, he says. “Stock options are typcially only for officers in the company,” says Suddleson. “You’re not going to give stock bonuses and incentives to a lot of your middle management or people on the production floor. But if you think about where the action happens to really make things improve, it’s got to happen at the worker-bee level. You’re probably not going to incentivize the worker bees by giving the executives more bonuses and stock options.”

Rather, an ideal incentive would set a bar (bringing in a certain amount in collections, for instance) and challenge all employees to meet it, Suddleson says. Then everyone who passes that mark would get a bonus or a non-monetary incentive like flextime or a paid day off, perhaps on a sliding scale depending on how well the worker performs. In that scenario, “you’re truly rewarding the performers, and the people that didn’t perform don’t get the reward,” he says. If you set a limit on how many people can get an incentive, you’ll demotivate the rest of the team, Suddleson says.

“So what will happen is someone will go, ‘Frank has all the best accounts, he gets three sales and he’s made his numbers for the year, where I’ve got to slug it out with 30 different accounts to make half of his numbers. There’s no way I can compete so I’m not even going to try.’ Not only are they not going to try, but what I’ve found with a lot of these employees is they actually slow down. They’ll cut back their achievements subconsciously to prove the point that it can’t be done,” says Suddleson.

And this is where teamwork comes in again. If there are a limited number of incentives, everyone who thinks they can meet the goal will compete. That means they won’t be working together. But if everyone has a shot at the pot of gold, they can assist each other once they’ve met the goal. “If I encourage Sally, who is there next to me, to make her numbers as well, I’m not jeopardizing my own bonus,” Suddleson says. “That creates a teamwork environment, where you say, ‘Hey, have you done this, have you checked up on this client?’ I’m motivating my team members because we want to see everyone win the bonus instead of holding things close to the vest and undercutting each other.”

If you want to foster a sense of competition, break people up into teams (like Alissa and I formed). People will continue to perform, but they can benefit from each other’s experience (Alissa, for instance: great at cutting wrapping paper. I, on the other hand, am great with taping and fastening things to walls.). And employees will still have someone to talk smack about (the other teams). This might be a stretch, but you could also make employees feel like they’re competing against management, Suddleson says. “As managers, you could essentially say, ‘Hey, I dare you to come take my money.’ There’s nothing wrong with having a competitive environment.”

Challenge accepted, management.

So what do you think? Do incentives work better when you give them to a handful of special snowflakes, or do you prefer to give everyone a shot at the glory (and the Amex gift card)?

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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