60% of global employers find financial incentives to be “very” or “extremely” effective in motivating employees, according to a recent McKinsey Quarterly
When implemented well, financial incentives encourage workers to achieve well-defined business goals and serve as a valuable tool for retention. When executed without strategy, however, they can actually negatively impact performance by causing employees to take shortcuts or become singularly focused on the incentivized targets.
In order to maximize performance through a well-defined incentive program, Trevor Warder, Hays
’ head of reward strategies, recommends that monetary bonuses be used for the following:
- Customer service and quality-focused issues
- Encouraging collaboration and commitment
- Rewarding efficiency
- Realizing short-term objectives
- Recognizing past performance
However, other HR imperatives require non-financial incentives as a means to stimulate employees. For example, to boost confidence and foster competence in junior staff, he advises leaders to invest in coaching and mentoring programs.
In addition, executives and senior leaders should be offered financial incentives that are linked to company-wide performance, and all staff members should be provided such features as profit sharing, stock options and recognition.
No matter what the reward structure, though, it’s critical that employers follow through in a transparent and fair manner.
“Trust is a critical issues here: if people don’t trust your plan or the way you run it, they won’t be happy, no matter how much it pays,” said Warder.
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