Incentives affect employee performance. Here’s what you need to know.

If you run a business in 2022, employee performance has to be top of mind at all times. It’s as simple as that. After all, your employees are the fuel that keeps the furnace of your business running. Let’s take a look at incentives and the role they play in workplace performance and motivation.

So, let’s break it down. In this article we’ll discuss:

• Do incentives affect employee performance – yay or nay?
• The conditions for success when you implement a recognition and rewards programme.
• Important implementation steps that everyone should stick to.

Do incentives affect employee performance?

As you are no doubt unsurprised to learn, the answer to this question is a resounding: ABSOLUTELY! We’re pretty sure you saw that one coming, but don’t fret, there are quite a few plot twists to this story that you may not have seen coming. There have been plenty of studies on this subject over the years (such as this one, this one and this one), but yet, businesses were still concerned that the money they were spending on incentives may be trickling down the drain instead of showing ROI.

Then, more recently, a groundbreaking study revealed that incentive programmes have the ability to boost employee performance by between 25% – 44%, but that the programme had to address certain issues inherent to human motivation in general and each company’s employees in particular. The study also revealed that most businesses lack important knowledge pertaining to the construction and rollout of programmes that work. However, when designed and implemented correctly, incentive programmes can improve performance, boost employee engagement, and attract top talent.

Conditions for success when implementing a recognition and rewards programme

For an incentive programme to be successful and positively affect employee performance, it has to tick the following boxes:

• The lack of performance has to be related to motivational deficiencies. There are various reasons why an employee could be underperforming. They could, for instance, suffer from a lack of resources, in which case investment in new operational tools would be more effective at increasing their performance. Or they may be overwhelmed by the responsibilities of their position, in which case they would benefit from further training, or additional assistance in their department. In short – incentives won’t work if underperformance is not the result of a lack of motivation.
• The desired performance level has to be measurable. The most effective employee recognition and reward programmes are tied to measurable goals that are challenging, but achievable. As such, you have to be sure that your incentive programme is tied to goal posts that your employees will be able to attain – making a win impossible is not going to lead to the behaviour you want to promote.
• Incentives have to be in alignment with organisational goals. Always ensure that the incentives you offer are in alignment with the overall goals, vision and mission of your enterprise. A lot of effort and resources go into these initiatives, and you want to be completely sure that the outcomes will drive employee engagement in a sustainable fashion, while fostering behaviour patterns that will benefit your business in the long run.

Important implementation steps that everyone should stick to

Once you have those boxes ticked, there are certain important steps you need to take to ensure that the incentive programme will be worth your while. These are:

1. Assessing the gap. Determine the gap between employee performance as it stands and where you’d like it to be. Ideally, you want to put numbers to these findings, although it won’t always be 100% possible. Once you know where you stand and where you’re headed, it becomes easier to measure progress.
2. Assigning value to work goals. The programme you choose to implement should assign value to work goals in a way that connects rewards to achievement and communicates a strong sense of how it will add value to the business overall.
3. Training and communicating. Make sure that your employees understand how the incentive programme works and keep communicating. Managers should be checking in with employees regularly to assess their progress and provide feedback on how they can correct their trajectory if things are not on track.
4. Following through. When goals are reached, incentives should be awarded. Celebrate the wins and be sure to share the news company-wide when an employee reaches their performance goals. This will boost morale and encourage others to do the same.
5. Analysing findings and providing feedback. Measure the success of your incentive programme and share the findings with your employees. Keep things transparent to ensure that everyone is on the same page where performance is concerned.

And there you have it in a nutshell. When designed and implemented correctly, incentive programmes can improve performance, boost employee engagement, and attract top talent. By checking all the boxes and understanding their implications, and by following the above steps in terms of implementation, your recognition and rewards programme should be well on its way to becoming a roaring success.