3 Reasons Why You Need an Incentive Plan
A company’s interest and focus on bonuses, incentives, and rewards will ebb and flow throughout the year. It usually peaks around the end of November when company leaders must think about paying end of year bonuses. It also peaks anytime we get feedback from our employees about what we can do to improve our company or when an employee leaves for better pay and bonuses elsewhere. It’s a hot topic when it’s hot, but the rest of the time, bonuses never cross our mind. At least until the next time it comes up.
Drawing on the Simon Sinek concept of “Start with Why”, I’d like to focus on why it’s critical to pay incentives. In the last 3 years of working to help companies build incentive compensation plans, we have seen examples over and over of why incentives can no longer be treated as an afterthought. That is unless you don’t mind just giving your hard-earned money away or watching your employees jump ship. The following are the 3 most important reasons to have an incentive plan in place.
- Incentives motivate your team to work harder.
- Incentives provide real meaningful feedback to your team.
- Humility! Don’t forget who helped you get here.
Work Harder
In 1953, facing severe food shortages, Russian leader Nikita Khrushchev launched an ambitious campaign to dramatically increase grain production. The Virgin Lands Campaign incentivized the Russian people to plant and harvest grain plots throughout Russia. Incentives were paid through high prices, reduced taxes, and free labor. In a matter of 3 years Russia saw an increase of over 50% in their total grain production which eliminated their food shortages. Poor planning and unpredictable weather limited the long-term success of the campaign. However, 70 years later the total area of grain planted in Kazakhstan (formerly USSR) is still double what it was in 1953 and the country is one of the largest exporters of grain in the world. In referring to the success of this campaign and his other initiatives, Khrushchev said, “Call it what you will, incentives are what get people to work harder.” Business leaders are coaches in the game of motivating their team to work harder. Financial incentives aren’t the only play in the motivational playbook, but they must surely have a prominent place in there.
Real Feedback
A couple years ago, my teenage daughter filmed my son having a meltdown as we drove to our family vacation destination. This hilarious short video was then shared with her friends on snapchat.
Everyone loved it! My daughter then posted it to another social media outlet. Before it was taken down a couple hours later for some privacy policy violation, the video had thousands of views. My son was on the verge of going viral. My daughter loved the immediate feedback she got from all the likes, shares, reposts, and comments. She’s still looking for her next viral video. In a world where feedback is almost instantaneous for everything they share on social media, is there any wonder our employees crave more feedback? According to Zippia Research, 65% of our employees desire more feedback. Building an incentive plan where you reward your team for their performance is one way to provide real meaningful feedback. The more often they are incentivized for performance , the better too. The financial incentive feedback does not compensate for lack of regular meaningful feedback, but together they are very powerful.
Stay Humble
A few weeks back I was working with my sales team to formalize our sales commission plan. We were discussing what I believed was a necessary level of commission for them. The individuals involved said that an increased level of commissions wasn’t going to motivate them to work any harder. Their motivation came from within. They were all in, working with me to make our project succeed. I love my sales team. However, I realized at that moment the incentive I was offering them was as important for me as it was to incentivize them. I needed to be able to share our success with them. Giving back to my team kept me grounded. It was a part of me giving credit where credit was due. To draw on Simon Sinek one more time,
“Leadership is not about being in charge. Leadership is about taking care of those in your charge.”
Giving back is as important to me as anything else I get from incentives. Paying incentives may seem like we’re just handing out more. I’ve learned however that they’re truly about getting more in return. Whether it’s getting your team to work harder, telling them how great they’re doing or helping you to be the leader you want to be, incentives are a crucial part of business today.
