Incentive Plans Will Fail Without Enough Communication

Implementing successful incentives involves careful design based on employee feedback and buy-in

Employee incentive programs are designed to achieve specific goals. These plans offer monetary and non-monetary rewards to drive behavior that hits these objectives and may take the form of offering phantom stock, cash bonuses, an ownership stake in the company, or other elements.

But whether the desired outcomes are greater employee retention, sales, productivity, or anything else, a team must understand and embrace the program to make it work.

Designing a successful program is a balancing act between math and psychology, and the latter calls for understanding what motivates a team and makes them comfortable. Unfortunately, some business owners and managers don’t grasp this dynamic, rolling out initiatives that leave employees confused and disengaged—or worse, resentful.

Two-way communication before, during, and after implementation can head off these problems. Here’s how to send and receive the clear messages that create winning incentives.

Incentives must motivate most people while creating definitive ROI

Different individuals are motivated by different things. To illustrate this concept, let’s use the example of benefits programs. If you asked employees what a dollar is worth to them, they’d say a dollar, of course. But if you specified “a dollar of healthcare,” a young, healthy employee who never visits the doctor might consider that less valuable. In contrast, an older individual with a family might view it as more than a buck.

Incentives sometimes have similar goals to benefits, but the objectives include driving specific behavior as well as employee retention, and the ultimate motivation is usually money. But like benefits, an incentive’s success depends on its perceived value. And this perceived worth and a program’s usefulness involve several components:

• Is the incentive big enough to motivate people?
• Are the components achievable?
• Will the incentive really drive the intended outcome?
• Do employees understand a program’s structure, and are they comfortable with it?

If the answer is “no” to any of those questions, an incentive plan will fail. Team members will often make little effort or generally ignore it. In some cases, employees may even game the system, which can have disastrous consequences. The most famous example of this is the Wells Fargo scandal, where the banking giant “incurred fines totaling $185 million because of a widespread practice of employees opening new accounts for existing customers without their authorization.”

Fortunately, situations like that are less common than ones in which teams simply don’t buy into the plan. But that scenario has significant consequences, too. Poorly designed incentives can have negative ROI, wasting money, time, and effort on something that doesn’t work. And any resulting employee dissatisfaction may even lower productivity or increase turnover.

The effects of incomplete design and implementation

We’ve encountered some failed initiatives over the years, and most of them stem from management using an exclusively top-down approach.

For example, one private company decided to implement a phantom ownership plan that awarded employees money equivalent to but not representing a stake in the business. It aimed to motivate team members to think like an owner by driving strategic and tactical behaviors.

But when management implemented the plan, the team was disengaged. They didn’t completely understand the details, couldn’t envision how its elements related to their behavior, and preferred the old system of simple annual bonuses.

The program itself wasn’t bad—but its implementation was terrible. Management had designed the incentive with little company-wide communication or input, and they merely rolled it out by showing the team members a complex spreadsheet.

As a result, people simply didn’t engage with the incentives. They didn’t like receiving long-term payments instead of quicker ones—for benchmarks and behaviors they didn’t understand. They also didn’t grasp where the numbers underlying the incentives came from. In the end, most team members thought that the company was doing things just fine the old way. Management had to salvage their plan, which meant going back to the drawing board.

How to design and communicate successful incentives

Good incentives start with evaluating the goals an organization wants to achieve. From there, the process requires gathering information before finalizing a design. And the essential source for which behaviors are achievable, realistic, and actionable is your employees.

Don’t confuse this process with having the team design the whole thing; management must set the objectives that are strategically good for the organization. But team members are a vital sounding board and source of information. Including them in the process also obtains buy-in and limits the confusion resulting from a sudden introduction of a new program.

The essential communication steps can include:

• Announcing the intent to design an incentive program.
• Conducting surveys, interviews, and focus groups before rollout, a mix that usually depends on the size of the business.
• These Q&As should determine what employees want—what will motivate them—and what is practical.
• A combination of written and verbal communications should provide updates on the status of the plan.
• Ideally, the pre-rollout communication process takes a few weeks to a month, a period that manages the expectation that something is being done.

Clear understandable summary documents must accompany the rollout, and ongoing communication after implementation reinforces success.

Gather data, design a program, execute, and communicate!

Successful incentives are directly tied to desired behaviors and measurable outcomes. They need team members who believe in them and are motivated to meet or exceed expectations. Plans must also be as simple and clear as possible to achieve the intended effect.

The key to achieving many of these elements is two-way communication. When a team embraces well-designed incentives, they can drastically improve a company. The ROI can be massive, so put in the effort to do things right!

Karp HR solutions can help you design, implement, and communicate an incentive program that improves your business. Contact us today for a free consultation.