How To Set Up a Point-Based Reward Program

Many people have clicked on a previous version of this blog post wanting to learn how they should set up a point-based reward program. 

Unfortunately, some individuals and recognition and reward providers suggest certain ideas as being best practices so the client’s employees will consume more points. So, buyer beware and let’s learn some principles versus supposed best practices to guide you.

My goal is to provide you with objective information along with solid principles for you to make wise decisions by.  I will also give you some pros and cons for some options.

Points to Consider

1. Always start with your big why or purpose for designing an incentive or reward program. 

Incentive programs are a method used to encourage identified people to perform specific actions or behaviors by a defined time period. Who? What? When? 

Businesses use incentives and point-based rewards to “motivate” employees to achieve specific results. We often use them with sales campaigns and with attracting and keeping customers. 

First, who is it you want to encourage to perform a certain task?  Next, be specific about the behavior you need them to do. How often must they perform this task? Or when does it need to be completed by?

The fundamental idea behind point-based rewards is to move employees away from just cash. The non-monetary focus allows employees to focus on getting something meaningful to them they might not spend money on themselves. 

2. List the reasons for specifically using a point-based reward program. 

Why are you choosing a point-based rewards system instead of cash or using gift cards? 

The benefits of using point-based rewards:

  • Employees easily understand the reward system as a majority of your employees will be familiar with point-based loyalty rewards, i.e. credit cards, major brand consumer cards, etc.
  • Points are straightforward and simple online administration for to manage within a reward program.
  • They are a great tool to use to get team members to collaborate on performance goals and projects.
  • You can give Points for reaching various targets towards the end goal and/or for the deadline due date.
  • Provides an alternative to having to handle cash or add monies to payroll statements.

Downfalls of point-based rewards:

  • Depending on the value assigned to the points, it’s unclear to employees what the points are worth (suggestions to deal with this are presented later on.)
  • When employees don’t redeem their points that leaves the company with unclaimed liability.
  • If the point values are unclear, it can leave employees feeling disappointed when they see the associated value of gift items available in a gift catalog.
  • You may have a limited array of gift merchandise items for your employees to choose from and redeem their points.
  • Vendors mark up the costs of merchandise displayed in the redemption catalog.
  • Tackling the right payment method for the points, so you pay on employee redemption versus paying up front on issuance of all points.

3.    Discuss with other leaders whether using point-based rewards is the right reward to give to people. 

Create a business case for using a points-based rewards program for your leaders and stakeholders. Outline in your plan the use of 90-day action plans for monitoring and implementing course corrections with your program. 

If you ask employees what they want, they will typically say money. However, when you give them a choice between a merchandise gift or experiential reward and the cash value, people will work harder for the tangible or experiential reward. The reason is they would not likely justify spending that amount of money on themselves for such a gift. 

When given cash people tend to pay off bills and pay for essentials. People forget why they got the reward, and there is no lasting association with the company. It gets buried in the pay statement.

4.    Identify the specific actions you want to improve upon in clear, objective, and actionable wording and how you want it done.

I will always remember visiting a power utility company that had once-upon-a-time given $50 gift cards to teams whose department leaders submitted an accident-free report either on a monthly basis.

But look at what you’re rewarding—a report with no accidents recorded. This $50 gift card caused supervisors and employees alike NOT to report minor accidents. That way their report was clean, and they all got their reward.

They didn’t reward safe behaviors. They gave rewards for a piece of paper with no accidents reported on it. 

The rewards for safety scenario above are no longer permissible by law. 

However, learn carefully from this. Spell out specifically the positive actions you want people to do, not what you don’t want them to do. Make sure you tell all employees how you want it done so there are no unethical practices or gaming for the rewards. 

5.    Determine the how you will track these activities.

How will the employee, supervisor, and manager know they correctly did the desired behavior? You and they need to know what the end product looks like when it’s done. How will you know it when you see it? 

If you repeat certain activities, what are the quantity numbers, time-frequency, completion rate, and quality of the outputs? You need to measure all these factors in whatever way is possible before you distribute any rewards.

6.    Consider the right way for how you will measure the desired activity. 

It is important to measure productivity and desired behaviors appropriately.  

Percentage of products manufactured: If you are manufacturing widgets, you will look at the percentage of products manufactured correctly to specifications and on time. 

The number of online statement conversions: If you are working in retail banking, it may be the number of clients without online banking whom you introduce to receiving their statement online. 

The number of sales per month: If you are in telemarketing and a sales campaign is on, it will be the representative who closes the highest number of sales that month.

Set up the systems, recording methods and reports, and the online processes needed to measure your target activities.

7.    Calculate the levels and the appropriate values of point-based rewards for achieving the various performance activities.

Different behaviors merit different valued rewards. You can reward incremental progress towards an end goal or wait for the full task or output to be completed.

You don’t reward an isolated instance of a behavior. You want a consistent and repeated occurrence of the behavior. 

Create a matrix that looks at different levels of behavioral measures to make it easy for supervisors and managers to identify when they see such actions. Then match these behaviors with an appropriate point-based reward level. 

A matrix guide might have criteria such as the level of impact of the actions (isolated or repeated), the frequency of occurrence of the behavior (once or often), the number of people impacted by the actions (few or many), alignment with the organizational values (consistent or inconsistent), and the achieving of a business goal (identify goal). 

Here are some examples of matrix levels by description rather than their broken down categories. 

Level 1: Could be a low impacting and singular and positive action to one person, or a team, that shows exemplary performance supporting our company values. 

Level 5: In contrast with Level 1, a Level 5 act could be a high impacting action that was consistently done, which has a direct impact to a department and achieved a strategic goal while supporting our values. 

8.    Meet specific employees’ needs by ensuring point-based rewards can be redeemed for items that are meaningful and motivational. 

Employees need to feel motivated by the choice of options they have available to them when they redeem their points.  Depending on the demographics and cultural makeup of your employees, consult with your vendor to scout out appropriate merchandise. And there are always name brand gift cards that might appeal to some of your employees.

There is no consistent strategy or best practice as to the value you should associate with points. Some pure incentive vendors suggest ½ a cent (0.005) per 1 point. But you could use half-a-cent, one cent, 10 cents, or even a dollar per point.

Each of these options could look like this: 

  • ½ a cent (0.005) per 1 point so 100 points = 50 cents equivalent
  • 1 cent (0.01) per 1 point so 100 points = $1    
  • 10 cents (0.10) per point so 100 points = $10
  • $1 per point (1.00) per point so 100 points = $100            

The key is making sure that the point value reward looks like a reasonable reward for the action performed. I think it is best not to use the dollar per point scenario because it looks too much like pure currency. 

Personally, I like the 10 cents per point because it is easiest to give 100 points, which sounds high but not too high. I find the 1,000 points amount when it is only worth $10 sounding unrealistic for a smaller outcome.

Using 10 cents per point as an example, if you gave an employee 100 points (the equivalent of $10), would that reward amount reflect the action they did? 

That’s where a matrix grid allows you to define and determine the specific behaviors, actions, and outputs, and then match them up with an appropriate level of reward amounts. 

Don’t compare employee point-reward levels with customer loyalty point-reward levels as they follow a completely different model or matrix set up. 

9.    Always qualify your performance activities so they align with your organizational values.

It is not just about completing the task and performing the right activities. Activities must always be done consistently with the organizational and moral values. Everyone must do the behaviors and actions the right way for the right reasons and not for gaming more points. 

Work with a vendor to help you out. But hopefully, this has given you some guidance to assist you in working with your provider. 

10. Remember there is wonderful data in using point-reward programs for further analysis.

Use of employee point-rewards programs produces rich data that provides ample analysis opportunities. 

By going beyond descriptive and diagnostic analysis you can move into the realm of predictive and prescriptive analytics and generate improved performance. Our points-based reward programs, coupled with social recognition programs, permit us to help our clients generate incredible ROI results. We can also correlate recognition and reward program results with key objectives and results from the company.

Hopefully, all this information will help plan the right approach if you are considering a point-based reward program.

Reflective Question: What is the best benefit that you see from using a point-based rewards program?

Roy is no longer writing new content for this site (he has retired!), but you can subscribe to Engage2Excel’s blog as Engage2Excel will be taking Roy’s place writing about similar topics on employee recognition and retention, leadership and strategy.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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