Recognition
Motivating employees through rewardsIn today's competitive market, more and more employers are foregoing salary increases and turning to performance-related award programs to attract and retain employees. But when it comes to creating a meaningful program, one size definitely does not fit all. LINDA WHITE |
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 [ 2005-12-14 ] |
"More than a cookie cutter approach to variable pay is required if these plans are going to inspire employees to have a positive impact on the organization's bottom line," says Keri Humber, a senior compensation consultant with Hewitt Associates, a global human resources services firm.
In its 27th annual Salary Increase Survey of nearly 400 organizations across Canada, Hewitt found that average salary increases for 2005 are slightly ahead of 2004 and are expected to remain the same for 2006. Performance-related award programs, also known as variable pay plans, remain an important tool for compensating employees.
According to the survey, organizations are recognizing the potential to use variable pay plans to motivate -- rather than simply reward -- their employees. In 2004, when employers were asked whether they used such plans to reward or motivate employees, 76% answered "reward." This year, that number dropped to 72%.
But organizations must pay careful attention to designing programs that focus employees on achieving goals aligned with business objectives if they're going to maximize the return of these plans.
"Variable pay plans must be customized to address the specific needs of the organization or even custom designed for specific groups within the organization. One size does not fit all," Humber says. "Doing so should help with attraction and retention pressures, which employers reported they were feeling more keenly than last year."
To maximize the success of pay-for-performance programs, employers must measure the effectiveness of their plans. But only 42% of survey respondents in 2004 indicated they were doing so. That number fell to 37% this year.
"Effective variable pay plans demonstrate a clear link between cost and achieving financial goals," Humber says. "Organizations that take the time to track the success of their plans are better able to align employee and business objectives. Monitoring also helps determine whether pay-for-performance programs are actually motivating employees."
If a program is going to be successful, employees must clearly understand what they're expected to achieve. "This enables the employee to focus their energies on behaviours that will ultimately be rewarded," says Jeff Baldock of Career Sport in Toronto. "In some cases, an employee may not have all the skills needed to achieve the goals that have been established. Training needs to be considered."
Goals must be within reach. "The performance level should be achievable or the scheme will have no motivational impact," Baldock says. "The scheme should also be sufficiently flexible to absorb downturns in the economy or other factors that could make the target very frustrating to reach."
Prepare employees for success. "Employers and employees need to discuss work processes, identify barriers and ways to reduce them," Baldock says. "For example, an employee may be working with a software system that's obsolete or doesn't even know how it works."
Employers should consider what motivates each employee -- including our natural desire to do well. "What is considered a reward for one may not be a reward for another," Baldock says. "There's some argument whether money or time off extinguishes the intrinsic motivation or the natural desire to do a job well.
"It feels good to contribute and this good feeling is a reward of itself. Placing too much emphasis on extrinsic rewards such as money is not helpful if it overlooks the desire we have to contribute. Employers are advised to consider providing coaching time to discern what an individual is naturally motivated by with their job."
Finally, don't forget your primary objectives. "At the end of the day, it's important that these plans are about helping customers reach better satisfaction," Baldock says. "If customers are going to be happier, they're going to want to spend more money at your company."
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