Employee Reward Programs: The Formula for Successful Rewards

Presented by Matt LundyRewarding Events & Incentives

▶ That which moves or influences the mind, or operates on the passions.

▶ That which incites, or has a tendency to incite to action.

▶ An additional payment (or other remuneration) to employees as a means of increasing output.

INCENTIVE Definition

▶ The action of recognizing or the state of being recognized.

▶ Special notice or attention

RECOGNITION Definition

RECOGNITION▶ Thanks for doing “x”▶ Occurs after the fact

INCENTIVES▶ IF you achieve “x” , you’ll earn “y”▶ Occurs before the fact

INCENTIVES vs. RECOGNITION

▶ Last year American companies spent $50,000,000,000 on merchandise and travel incentives and that doesn’t count the monetary payouts that are untrackable.

▶ “There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and financial success”

The Science Behind Incentives

Maslow’s Hierarchy of Needs

The Bell Curve

Productivity Gains

▶ 99% of employees say it’s important to be recognized for good work (Websurveyor, 2002)

▶ 85% of employees feel overworked and underappreciated (Dr. Robert Cooper, 2005)

▶ 75% of employees say they could be more effective in their jobs (Public Agenda Forum, 2004)

▶ 70% of unhappy customers abandon vendors because of poor service (Forum Corp, 2003)

NUMBERS THAT MATTER

▶Sales▶Customer Service▶Safety▶Health & Wellness▶Process Improvement

Any aspect of your business…

What you re-enforce iswhat you get

Incentive RULE # 1

STEP 1: Identify Objectives STEP 2: Define Target Audience STEP 3: Build Your Budget STEP 4: Develop Program Structure STEP 5: Designate Program Administrator STEP 6: Select Rewards and Presentation STEP 7: Promote The Program STEP 8: Track The Program STEP 9: Distribute Awards and Celebrate Success STEP 10: Evaluate and Communicate Results

The Process

1) Incentive programs do not reward

expected or average performance.

2 ) You only reward achievement of

specific, measurable goals.

Have to measure Have to be specific

Budget Foundations

Upfront Costs Program Launch Event Communication Pieces, mailers/posters Promotional items Dedicated websiteOngoing Costs Program Administration Ongoing communications Rewards

More than Rewards

An incentive program is funded by extra profit from increased sales or cost savings.

In essence, you are trading a portion of the additional profit that you currently do not have. You are giving up a piece of future earnings that you hope to achieve.

What does self-funding really mean?

Look at your best employee in that job/role What makes them your best? What are the measurable characteristics? That “best” person should be your

highest rewarded employee in a well designed program.

Not sure how to Quantify?

What you re-enforce iswhat you get

Incentive RULE # 1

Objectively. . . Company goals Payout rates Return on investment Budgetary constraints

Subjectively . . . Is the earning opportunity significant

enough to generate the desired results? Is the program the right length to achieve

the goals and hold participant interest?

Objective vs. Subjective

Open End 1) Unknown number of potential winners2) Anyone who “hits the goal” gets rewarded3) Hard to budget for / maximum impact

Closed End1) Known number of potential winners2) Only top “10” get rewarded3) Easy to budget for / less impact

Open End vs. Closed End

Dilbert

1) What do you expect to attain in incremental dollars? (This is from increased sales, improved safety (lower insurance, time loss etc.)

2) Assign a percentage of that to pay for the incentive program; 10 - 40%, depending on the program.

3) Of that, a traditional breakdown would be 5-10% for administration, 10-20% for communication and launch, and the remainder for rewards.

Nuts & Bolts

If your program is longer than six months, reward potential should represent between 6% and 10% of a participant's salary.

If your program is shorter, say 60 to 90 days, consider providing participants with the opportunity to earn rewards valued between 3% to 5% of their salary

Traditionally…

▶ Your program = your rules▶ You balance the reward vs. the increased

productivity or cost savings▶ Good programs pay for themselves▶ No achievement of goals = NO payout▶ The budget is already there in most cases,

it’s just going to an insurance company or lost in low productivity

The “Cost” of Incentives

Some art, some science

Look at your demographics, what works for your culture and audience?

If you ask people what they want they will tell you 100% of the time - they want money.

They say money, because they really want the choice of how to spend it.

Picking the right rewards

Research has demonstrated repeatedly, cash rewards don't motivate extra effort

Cash is thought of as compensation and is spent on necessities. 

In a recent survey people were asked how they spent their last cash reward. The top 4 responses were:◦ Bills - 29% ◦ Do not remember - 18%◦ Never received cash reward – 15%◦ Household items - 11%

CASH HAS NO VALUE TO THE SPONSORING COMPANY

MONEY

Money Stored Value Cards

◦ VISA or AMEX Cards loaded once with a specific dollar value (use it and lose it)

◦ Custom VISA Cards that are reloadable◦ Restaurant and Retail Gift Cards

Merchandise◦ Brand Name◦ Imprinted / Promotional Merchandise

Travel

Reward Options

Tough to change that Custom debit cards Keeps funds out of the checking account They see your name when they spend the

money

If you are giving Money…

No Fee Gift Cards

Visibility of the reward – every time you use it you remember where it came from

You can brag about merchandise while it’s not cool to brag about $$

Stronger link to sponsor company than something you went out and purchased

Online Catalogs today that are totally customizable

Choice is critical to participants

MERCHANDISE

Great reward - creates memories and unique experiences for participants

I saw grown men turn into little boys at the Superbowl and the Masters

Drawbacks are that they are expensive and take your top performers out of the office

Also fewer companies want their top performers in the same place or on the same plane

TRAVEL

Cash – covered that The Contest with 1 or 2 winners Group goals w/o individual element Unrealistic Goals Goals set w/o employee input Was the reward worth the effort? Who got to choose the reward? Gray areas – subjective calls Failure to communicate

Common Mistakes

Were the rules of the program communicated effectively to the participants? Everybody enrolled in the program must know precisely what's expected of them during the course of the program.

Did you keep your participants aware of their progress throughout the program period? If not, they probably lost interest somewhere along the way. Participants tend to contribute extra effort when they know they're close to a reward.

Communication

Communicate – talk to your employees Do they have what they need? Is there a better way to do their job? Are all existing programs aligned with

company goals? Do employees know your company goals? Do employees know their part in the whole? Survey them - Small companies are terrified

to ask, because they may actually have to do something.

Things you can do today

Process Improvement / Safety Committees Titles – Director of first impressions SME – subject matter expert Mentors Time Off / Flex time Sports Tickets Day at the Spa Sponsor company teams – bowling, volleyball,

softball etc. team building outside the office Golf Tournament Sponsor – Invite top performers

or customers

Recognition – Make it Public

OFFICE SPACEPeter Gibbons: It's a problem of motivation, all

right? Now if I work my butt off and Initech ships a few extra units, I don't see another dime; so where's the motivation? And I have eight different bosses right now. So that means that when I make a mistake, I have eight different people coming by to tell me about it. That's my only real motivation - not to be hassled; that, and the fear of losing my job. But you know, Bob that will only make someone work just hard enough not to get fired.

So if you are getting this…

But Really want this…

Increased Sales Increased Loyalty - Reduced Employee

Turnover Increased Safety Process Improvements Implemented – costs

savings Improved Customer Service Ratings Better Trained Employees Employees who treat it like their own

business

Benefits of Incentives

It costs between 5 and 7 times more to find a new customer than to retain one (S&MM, August 2006)

A 5% reduction in lost customers can increase profits by up to 75% (S&MM, August 2006)

Domino’s Pizza and Ford Motor estimate a loyal customer is worth $5000 over 10 years, and $142,000 over their lifetime (S&MM, August 2006)

67% of consumers change their place of business for little or no reason (S&MM, August 2006)

Customers

quick and easy things Referral Program Robust POS system can create your own gift

cards. POS can track customers purchases Send a personal hand written thank you

Customers

“There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and financial success” – Forum Corp. 2005

Show of hands, how many of you have any ofthe following?

Winn Dixie or Save a Center card Frequent Flier clubs? Points on credit or debit cards Points on Hotel stays Points on Car Rentals Points on Starbucks

So do your employees

CULTURE SHIFT