How to set up an incentive scheme


As well as keeping them happy, rewarding staff can help organisations with retention and development.


Setting up an employee incentive scheme is trickier than it sounds. It is not simply a matter of setting targets and giving prizes to staff who attain them. You’ve got to communicate what you are doing, why and how, reward people appropriately, and most importantly, get buy-in from employees and the board.

Andrea Born, head of business incentives at House of Fraser, and John Davis, managing director of Argos Business Solutions, are both heavily involved in employee incentive schemes. They have come up with their top tips for Personnel Today readers on how to make them work.

Communicate goals

Communicate what you are doing and why is crucial to success. Everyone needs to know what the goals are and what the rewards are for achieving those goals. They need to be able to relate to both of them or they will disengage. Born thinks you can’t be too vocal. “You need to be loud and proud about it,” she says.

The thing is to promote what you are doing – give a talk, put it on the intranet, send company-wide e-mails and leaflets. All this needs to be done from the moment you launch the incentive scheme, otherwise it will fizzle out or never even get off the ground.

Know your objectives

There is no point implementing an incentive scheme just because everyone else is. Establish what aspect of your business you are trying to improve, be it product knowledge, absenteeism rates, customer satisfaction or retention rates, for example. Then establish how the incentive scheme is going to achieve that.

You need to know what those objectives are worth to you in monetary terms, so that you know how much you are prepared to spend to generate the desired return on investment.

Davis thinks this is where many companies slip up. “A lot of people test schemes while not understanding what the monetary rewards are for them, but it is the monetary rewards that drive the budget,” he says.

Convince the board

If you have got the objectives right, know what you want to do, why and how, then winning the board over should not be too hard.

“You need to have a strong business case,” explains Davis. “What are you trying to achieve? Have five or six critical success factors – service levels, product knowledge etc – and measurable targets. If you are able to demonstrate the financial benefits, getting buy-in should be easy.”

Consult with staff

As such schemes are all about staff participation, it makes sense to get them involved at the beginning. Find out what would motivate them to work harder or please more customers. Is it a cash boost? Or would they prefer music vouchers?

A common mistake to avoid is assuming that staff will all want the same rewards. “Rewards have to be relevant to the employee,” says Davis. “There is no point giving golf vouchers to someone who does not play golf. Profile people, ask a few questions to find out about their hobbies so that they get the right reward.”

But Davis warns that employers must clarify what the reward limits are. “If you’re polling employees, you have to be careful not to raise expectations too high because this could have a demotivating effect,” he says.

Make it pertinent

This ties into ensuring the rewards are appropriate. Different departments or locations will probably have different objectives, so you need to establish what those are and how to reward them.

Born thinks the best schemes are those that work on a local level. If it is improved teamwork that is being rewarded, she recommends a team reward.

“Experience vouchers are very good for groups,” she says. “Get them to do an activity or take them away for a weekend.”

Argos Business Solutions has a scheme with an oil company, and one health and safety initiative they run is all about team safety awareness.

“If there aren’t any accidents during a year, staff are rewarded with big prizes,” says Davis. “This means they keep an eye on each other as a team.”

Maintain momentum

Apart from the oil-rig example, Davis advises against annual rewards. He thinks staff need to be constantly thinking about rewards and striving to achieve them. “The more you can get people earning points regularly, the more buy-in you will get,” he says. “Management needs to keep banging the drum and alerting employees to any results, new targets or rewards. It needs to become part of the company culture.”

Measure success

This is best done by measuring whether you are meeting your objectives. Assess performance and the return on investment.

If it is lower absenteeism rates you’re after, then look at the HR statistics. Poll staff through employee opinion surveys, although the best measure is employee take-up and factual results.

Act when take-up is low

Both Born and Davis say that if take-up is low, it is not working. Then it is a case of assessing the whole scheme – are your objectives right? Are the targets achievable and widely understood? Do workers know why the scheme exists? And are the rewards right? The best way to find out is to look at any measurables and consult employees.