What Makes a Good Incentive Plan?

Employees are paid a salary and benefits for doing their job. Incentives are designed for incremental effort and stretch goals. So, what makes a good incentive plan? I will give you six tips that will tap into employee motivation to help create an effective incentive program.

Most people get excited when a new incentive plan is announced. It gives them new motivation to work harder and achieve more. It's another reason to come to the office energized and use creativity to solve problems in the workplace. However, only the best programs actually achieve those outcomes. Plans that aren't effective fail to motivate employees and ultimately fall by the wayside. So, if you're looking to incentivize your staff to bring out their best work, you need to know what makes a program effective. 


Types of Incentive Plans

You have a variety of options when it comes to incentives. Each serves a different purpose to meet your assorted business needs. A few common plans include:

  • Group Incentive Promotions. This might include a team goal for a department, location, or business unit.
  • Spurt Program. This is frequently used in sales to drive activity during a seasonally slow period or to move inventory of a specific product. 
  • Meetings and Events. This is common for strategic planning sessions and all-employee kick-off events. 
  • Individual Travel. This is typically for a top-performer program and can be used with employee recognition programs.

6 Tips to Make a Good Incentive Plan

Whatever your incentive plan includes, there are some common best practices in the approach. Our list below is framed through the lens of ej4, an award-winning employee training and eLearning services company. One of the forgotten components of a successful plan is training. Participants need to work to the best of their abilities to meet goals. Training may be required to hone the skills needed to improve upon their previous best ability. 


6 Tips to Make a Good Incentive Plan


1. Target the Audience

Similar to a marketing plan or a training plan, your incentive plan needs to be targeted to a specific audience. The goals, rewards, and communications can all look a little different depending on who the target is. 

  • A top-performer sales incentive may be a year-long program and end with a grand trip to Hawaii for the winners. 
  • A call center incentive targeting customer service reps may be based on call metrics for a week or a month, include posters, stickers and flyers, and end with a pizza party and new company logoed jackets.
  • A car dealership incentive may be tied to customer survey scores evaluated quarterly, with all communications going through an app, and employees accumulating points to redeem in an online catalog.

2. Establish SMART Goals

“Do this, get that.” Trying to achieve a nebulous goal isn't easy. If your program has unclear requirements and rewards, your employees may give up working towards the prize. Ensure your program is well-defined, clearly communicated and periodically reinforced. Make sure all of your employees know what they have to do to be eligible for participation and what rewards they get at which stages. 

Part of the benefit of an incentive program is the discretionary effort employees give while working towards the goal. This increased productivity greatly benefits the company. 

SMART Goals are common in business. You may even consider using a SMART goal setting worksheet for each employee to translate company or team goals into individual goals that are more meaningful. 

  • S: Specific
  • M: Measurable
  • A: Attainable
  • R: Relevant
  • T: Time-bound

3. Offer Appealing Rewards

When many employers hear "incentive program," they automatically think "cash bonuses," however, a lump sum doesn't always have to be the reward for good work. In fact, offering a range of awards that depend on the task or goal employees complete can have more positive outcomes. This is especially true, as some rewards are more motivating in certain situations and for certain people.

Some companies run employee surveys to determine the awards that will be most motivating. Which awards will they work harder to earn? Again, that discretionary effort an employee exerts during the program is key to success. So, why not offer the awards that are most desired? Extra PTO, trips, points for an online catalog, gift cards, etc. 

Not all of your rewards have to be big or expensive. You can offer smaller awards for the steps that are required to meet the larger goals. Superhero figures for meeting cold call goals. Free lunch if an employee gets a shout-out from a client. Some companies develop an ongoing point system. They earn points for a variety of behaviors: 

  • Completing required eLearning videos as part of their training
  • Scoring 100% on a quiz on company core values, mission, and vision
  • Recognizing another employee for exemplary behavior
  • Getting recognized by a coworker for going above and beyond

4. Align with Your Culture

Whether the program is company-wide or department-specific, the culture needs to support the activities of the team working towards the goals. A major part of your culture should be the shared goals whether you have incentive programs or not. It makes sense to incorporate your core values into the incentive program as well. You will also need manager buy-in and support to launch, communicate and champion the program for the entire campaign.

Your learning culture is a major component of the overall culture. Employees may need training on the skills required to meet their goals. Both incentives and training are about changing behavior. They can work hand-in-hand. If you are unclear about what kind of learning culture you have, you can read more in our blog “What Kind of Learning Culture Does Your Company Have?


5. Incorporate Training

What if employees are already working very hard every day? You are now asking them to work harder and to strive towards stretch goals. They may need new skills so they can work smarter to achieve these goals. They may need the training to refresh their memory on certain behaviors tied to the program.

In some cases, you may require certain courses as part of the new program. Opening up your training library for self-directed learning will allow employees to find the courses they need on their own. 

  • During a safety incentive to reach X# of days with zero incidents, the company should reassign courses on forklift safety, electrical safety, ladder safety, PPE, etc. 
  • A rookie salesperson may look for courses on handling objections. 
  • Your business development team may want to revisit videos on leaving voicemail messages that get returned or questions to ask in a discovery call. 
  • Customer service reps may want to refresh their skills in handling angry callers.
  • Hospitality employees wanting to increase survey scores may want to rewatch courses about front of the house check-in procedures, etiquette, and presentation.

6. Communicate, Track, Report, Communicate

As with any major new initiative, it’s critical to clearly communicate the goals and awards but also generate excitement and awareness. Leverage any available channels like email, corporate intranet or collaboration platforms, signage in common areas, and printed material.

Track and report the progress towards the goals at least on a monthly basis. Consider using your training department’s authoring tool to create videos to communicate the results to the participants. Encourage managers to reinforce the reporting and maintain interest and excitement in the incentive plan. 

What Makes a Good Incentive Plan?

At ej4, we believe the best incentive plans incorporate training for their employees. Sometimes the access to training is considered to be a perk in itself. If this is interesting to you, take a look at our eLearning video library to see some samples of our courses. Common incentive plans focus on sales and safety, two of our most popular topics.

Additional Resources

Editor’s Note: This post was originally published on August 17, 2015 and has been updated for freshness and comprehensiveness.

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