The Future of Financial Incentives
What Motivates Millennials?
I’m not afraid to admit that I’m motivated by money. Every day I make decisions that are motivated by money. Where to eat, what clothes to wear, what car to drive, where to vacation, what career to pursue and so many more. Is it my primary motivation? Absolutely not! That’s another blog entirely. But there’s a financial piece to most big decisions I make each day. Being from generation X, this is exactly what you’d expect from me. However, my generation is making up less and less of the workforce. How do financial incentives play a role in a workforce that’s now dominated by millennials and gen Z?
We’ve all heard that the new generations are motivated less, and less by money. And yet, we just went through the great resignation where nearly 1/3 of the American workforce changed jobs. According to PBS.org, 52% of millennials, and gen z changed jobs in the last 2 years. And what was the top reason they changed jobs? You guessed it. Better pay! While money may not be the primary indicator of workplace satisfaction, it surely appears to be an important one.
Year End Bonuses
Over the last 5 years I have worked with hundreds of companies to design an incentive compensation plan that was more than just an extra paycheck. One theme rings true with every one of these companies. The time-honored tradition of an end-of-year discretionary bonus is no longer applicable to today’s workforce. They’ll take the money, but it’s nothing more than an expectation to them.
The 2022 Global Benefits Attitude Survey found that 56% of employees leave their jobs for better pay and bonuses. The same study found that over half of employees are dissatisfied with their company’s rewards program. Every indication points to the need for our businesses to make a change in how we reward our team members. But how?
Pay For Performance
It’s time for the business world to shift from discretionary bonuses to paying performance bonuses! The pay for performance (P4P) model has worked well in certain industries for decades. Professional salespeople thrive under this model. It’s called sales commissions. I’ve seen many good P4P plans used well in other niches too, but very few address the entire team. So how do we implement the P4P model for the rest of our team members? Drawing from a concept that Clayton Christensen, used to establish a marketing strategy for new products, I’ve learned to ask one simple question. What is the job they are hired to do? If they do it well, reward them. Not only does this model put your people investment dollars to work, it also provides performance feedback that our workforce craves.
In a time when over half of our workforce would take a new job for better pay and bonuses, we need to change how we incentivize our team members. Do it right to make sure they’re not leaving because “they pay better”.