Getting your head around using incentives the best way possible is not an easy task. To obtain maximum impact on performance while keeping incentives meaningful to the players involved, requires skill, strategy and systematic trial and error. It is a combination of both behavioral science and pure economics. Consider these Top 10 Ways for making your incentives more effective.
- Final Outcome. With incentives you have to be very clear about what it is you want people to be able to do or accomplish. Spell out exactly what the end result is that you want them doing so there is no question. People will always try to play the incentive game if results are ill defined.
- Incremental Incentives. When individuals are far from meeting targets or know they are ranked low amongst peers they are less likely to be motivated to strive for incentives. Make sure to use incentives for achieving incremental improvement targets as well as shooting for the end result.
- Visible Incentives. When using monetary incentives, remember the money-board, so to speak, really depends upon a great deal of visibility. Think national lotteries and the power behind those dollar amounts. Use this as another badge of honor to hold up winning the bonus or award.
- Status Power. Draw upon the power of positional status whether an enhanced job title or promotion to a new position, or purely an elite award that elevates the prestige of the individual in the eyes of their peers and the company. Criteria and evaluation processes must clearly be transparent and fair.
- Goal Commitment. For any incentive to have any drive and purpose to it, the target goal must be meaningful and motivational to the majority of individuals involved. Strive for a collaborative process where possible in defining performance goals so full commitment is gained.
- Competition Impact. Interactive aspects of peer pressure and competition are vital elements with designing incentive programs that achieve success. You need to ensure performance targets are challenging enough and incentives are desired by the majority of people.
- Conduct Rules. An all or nothing scenario for earning incentives creates a human possibility for gaming or manipulating the system. Establish ethical standards and rules that are meticulously enforced to maintain appropriate practices and right behaviors for everyone involved.
- Multiple Levels. To eliminate the all or nothing situation above, consider multiple levels of incentives for various levels of performance. The higher the goal level requires a higher level of reward. Also ensure clear communication is delivered of what the minimum performance must be.
- Non financial Measures. With the obvious need for financial outcomes and key performance metrics it is essential for strategic and cultural alignment to utilize nonfinancial measures. Building in customer satisfaction and other qualitative variables helps focus on long term results versus short term fixes.
- Leveraging Risk. When people are more risk averse for sales or performance targets increase the number of winners and spread out the incentive budget distribution. If risk tolerance is neutral use the Winner-Takes-All. And when risk tolerance is high reduce the number of winners and increase the value of incentives.
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