Why you should measure your incentive programs!

Why you should measure your incentive programs!
In our November 17, 2010 issue, The Conference Board of Canada reported that “Four in five Canadian organizations surveyed by offer employees incentives – such as variable pay, performance bonuses, and annual incentives – to motivate them to achieve performance goals.”  However, according to the board’s report Making Short-Term Incentives Work for Your Organization, most organizations using these types of plans do not measure the effectiveness of their programs on organizational results. Naturally, we wondered why most organizations are not analyzing these programs.

We put the question to frequent Workplace columnist Doug Brown, president of DBC Marketing Inc., employee engagement specialist and partner! DBC Marketing provides strategies and solutions to companies that engage with employees and increase productivity. Here’s what Doug said:
“Measurement is an important element to incentive programs. The challenge for many companies is to directly correlate the level of performance to the result as in several cases there are other factors that also influence or impact the result.

Some metrics are easier to assess and benchmark – turnover and absenteeism, sales growth or profit revenue are examples – but what does morale and motivation mean to the bottom line? Everyone would likely agree that high morale and motivation are important but when you invest in these programs how can you measure their impact?

Incentive programs don’t work in every situation and in some cases, depending on the tasks and goals incented, they can actually hinder performance. Incentive programs also need to be viewed with a holistic approach as they can sometimes have impact in other areas. For example, sales incentives can help drive sales but if this results in new clients from which the organization cannot collect payments, should the incentives really be paid out? Or, how these increased sales impact production? Overtime could be required that might mean more costly production to deliver the products on time, which would eliminate the financial gain from the increased sales.

Still measurement is important and one might look to the “Master Measurement Model” developed by the American Productivity and Quality Centre [http://www.apqc.org] as a tool to identify key performance indicators, relate these to financial values, and determine how the company truly benefits when goals are achieved.

It is also important to realize that intrinsic motivators are generally more powerful than extrinsic motivators such as incentives. Ideally the best solutions within companies are to utilize a combination of both intrinsic and extrinsic motivators to appeal to all of the various demographics and interests in your workplace. Additional strategies can include leadership development to meet employee emotional needs or health and wellness programs to help them reduce stress levels and improve their health.”