Are Your Performance Incentives Driving the Results You Want?

For decades, designing incentive programs was about finding the right mix of compensation and benefits such as health insurance and vacation time. Those days have come and gone. Business organizations now understand that a personalized incentive system is essential to attracting, motivating, and developing talent. So why are only a few companies doing it?

Incentives are transitioning from standardized to individualized. Today companies understand that effective rewards programs need to match the needs and preferences of each employee. Done correctly, this new approach to performance-based management can become a substantial competitive advantage.

Employees respond favorably to incentive programs that provide raises, bonuses, or other perks more often than the traditional once-a-year reward system. Recent research showed that employees who receive regular small rewards, in the form of money, perks, or recognition, are eight times more engaged than those who receive a bonus once a year. (See SHRM / Globoforce employee recognition report, 2018.)

Many employee incentive programs are narrowly focused on a year-end bonus, or an extra week of vacation tied to tenure. Many companies are missing an opportunity to assess worker preferences and tailor their incentives and rewards to a diverse workforce. Individualized incentives like schedule flexibility, developmental opportunities, more 3 day weekends and recognition are often more motivating and they usually cost less.

Align for Results

Businesses can align incentives and rewards with company goals by identifying the mediating behaviors that drive business outcomes. When a company creates the right incentives and rewards for their people, they profit with their people, and everybody wins.

Alignment between incentives, individual preferences, and company goals leads to results. Bonus amounts can be tied to the achievement of specific goals. Long-term stock options can be based on leadership activities. Promotions to leadership roles can be tied to specific achievements. Some companies now provide a menu of incentive and reward options when they are making an initial employment offer. The new hire can choose salary or stock options; work schedule flexibility (e.g. more 3-day weekends), more vacation time, higher base pay or a higher bonus based on specific results.

Employee incentives and rewards appear to be the last area of human capital management to become individualized, even though personal preferences are very strategic in this area. Companies that identify individual preferences and then personalize incentives and rewards have a distinct advantage in the talent market. Employees want customized incentives and rewards that reflect their values and preferences. They don’t want a one-size-fits-all approach from the past. Here are few ways to deliver more of what employees want:

Profit Sharing

Profit sharing plans offer employees a chance to share in the company’s pre-tax profits, giving the employees a sense of participation and accountability in the company’s success.

Sales Commissions

Set up incremental sales commission levels. When sales surpass a stated level, the commission rate increases, instead of decreasing.

Gain Sharing

Gain sharing plans are an incentive plan in which employees receive benefits directly as a result of cost-saving measures that they initiate or identify.

Retention Bonus

A retention bonus is a payment or reward outside of an employee’s regular salary that is offered as an incentive to keep an employee on the job during a critical business cycle, such as a merger or acquisition.

Team Bonus

Incentive plans can be based on the performance of the team, as well as the individual.

Project Bonus

Organizations can structure bonus payments at the end of a project timeline to give employees extra motivation to see the project through to completion.


  1. Henry Killingsworth says

    It was interesting when you talked about how incentive programs are becoming more personalized. I would think that businesses would want to have incentive programs so that employees will push themselves to do better. When employees are pushing themselves more, a business is going to be more successful.

  2. Adam Goloightly says

    I can see how a business could really benefit from getting the right kind of incentives to help their employees. Giving them the chance to travel could give them the incentive they need to be more effective. It was interesting to learn about how employees should see the project through to completion with structured bonus payments.

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