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How to... set up incentive programmes

For an employee incentive scheme to work effectively, it must be relevant, measurable, open, fair and available to all. If not, it can have the opposite effect and lead to demotivation and even resentment. Many schemes fail because of poor communication by management, unrealistic targets and/or a lack of clarity around the process.

For any programme to be successful, the participants must clearly understand what they have to do to be rewarded, how they will be measured, and what they will receive for achieving their set goals. Once it is established, it is important to continually reassess the effectiveness of the scheme and communicate any necessary changes promptly, clearly and concisely. When setting up an incentive programme, it is important to consider the following:

1 Decide who can participate

Incentive programmes have historically been associated with sales initiatives, but all employees whose behaviour has an impact on the performance you are trying to drive should be considered, even if they do not come into direct contact with the customer.

2 Choose the right rewards

Programmes should be tailored to the audience and rewards should be seen as aspirational. There is a danger that cash incentives can be confused with salary and bonus, and become expected each year. Vouchers are a good alternative, and can yield a cost benefit by buying in bulk. For an ongoing scheme, a points-based reward system may be more suitable, enabling employees to redeem their points against a choice of prizes. Non-cash incentives such as bespoke merchandise ranges, events and experience vouchers also give the flexibility for a scheme to be refreshed without having to increase the value.

3 Tailor your communication

A variety of communication vehicles should be used and the media must be tailored to suit individuals in the scheme. For example, an initial email might introduce the scheme, supported by team briefings (depending on the environment) and posters and "table talkers" in breakout areas. Text messages are also an effective way of communicating with audiences who are frequently away from the office environment. Creating a "buzz" around the programme, both at launch and on an ongoing basis, will maximise engagement. Likewise, public presentations of awards won not only give a sense of pride for the recipient, but demonstrate that the goals are achievable and encourage others to participate.

4 Fix measurable goals

Individual incentive goals should be aligned with overall company strategies. It is also important to think about the overall impact of the scheme, as people tend to do only those things that are measured and rewarded. Clearly defined objectives and measures will also avoid allegations of favouritism that might otherwise arise.

5 Ensure goals are achievable

Performance goals should be challenging, yet achievable, otherwise the incentive may well have the opposite effect and become demotivating.

6 Track and publish progress

Performance reporting needs to be regular and rapid so that participants can see what they need to do to earn reward. Incentive winners should be rewarded publicly to reinforce the value and purpose of the scheme. Measure pre-incentive performance levels against the post-incentive levels to see the impact on the business.

Key points

- Target all relevant employees.
- Communicate before the launch and during the incentive for maximum engagement levels.
- Set goals that are in line with company strategy, are clear, measurable, challenging, yet achievable.
- Select aspirational rewards to suit the participants.
- Ensure all progress is tracked and published.