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Employees: Strategic Issues

Incentive or recognition programs targeting non-sales employees entail critical design elements that should be understood at the strategic planning stage.

Internal marketing designed to change behavior is serious business that deserves the same attention as any other marketing plan, with a clear plan. It requires designated roles and responsibilities, and measurable results.

As with any internal marketing plan, the program has to include the following results:


  • As with any marketing or business program, the employee incentive program should have a strategic plan spelling out every element including goals, strategies, measurable objectives, and the plan’s target audience.
  • Goals provide an overall summary of what you want to accomplish; the specific objectives should be measurable, simple, specific, and obtainable. Begin with a clear, briefly stated objective, and communicate it to all participants. The structure of the program should detail exactly who is the target audience, and anyone else who will be influenced by the program.
  • The budget is determined by calculating the value of the behavior to the organization and allocating a reasonable amount for meaningful rewards and recognition, and the administration, communication, and training costs associated with the effort. In general, the three elements of budgeting include: 1) number of participants, 2) length of program, 3) expected results.

    Unlike other types of incentive programs, it is often possible to make the program self-liquidating, in that much of the cost can be funded out of incremental performance as measured by quality, productivity, or service benefits. Here’s a sample budget breakdown:

    Awards 80%
    Communication/Promotion 10%
    Administration 5%
    Training/Research 5%
  • There are two types of award budgets: 1) closed-ended, and 2) open-ended. You would need to determine the maximum costs involved with a closed-ended program, and an estimate of costs involved for an open-ended program.
  • The size of the group is important to the budget of the program, as well as the ability to communicate clearly and measure the results accurately. Other considerations are geographic boundaries or regions, legal considerations, family issues, the length and timing of the program, individual goals or team goals, and the reward system.
  • Define both quantifiable and qualitative goals that can be measured, and keep it simple. It might be necessary to look at historical data and come up with an average in order to define a particular sales goal. The goal needs to be fair to all involved, and obtainable by everyone. Whenever possible, the objectives should include a result goal (i.e., 10 percent improvement in productivity), and process goals (i.e., two behaviors that could lead to increased productivity). Goals should almost always have some sort of relationship to one another.
  • You can assign a weight to these goals based on their importance to the organization: One goal might have a factor of 0.50; another of 0.30 and another of 0.20. You multiply numerical results by these factors to arrive at a weighted value.
  • Select awards that individuals will be emotionally vested in obtaining; otherwise, the employee will not pursue the goal.
  • Administration is approximately 20% of the program budget, and, depending on the size of the program, absorbs a good 20% of the planner's time. This explains why large organizations often outsource implementation.
  • The target group needs clear, consistent communication and timely feedback on measurement of performance.
  • Analyze results by asking, “Did the program achieve its objectives? Were the participants motivated to change their behaviors?”

Here are the steps to designing a results-based incentive program for employees:

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Step 1. Create the Strategic Plan

The incentive or recognition program should address clear objectives with a specific strategy and tactics in order to generate measurable results. The strategic plan is a business plan that outlines all elements that follow. The ten steps (not necessarily in sequential order) establish discipline to the design process to ensure that all aspects have been covered. The strategic planning stage should lay out:

  • Program objectives
  • Audience
  • Fact-finding and involvement plans
  • Program structure
  • Communication and training approaches
  • Rewards and recognition strategy
  • Budget
  • Return on investment plan.

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Step 2. Define the Audience(s)

Understand as much as possible about the audience(s) whose behaviors you will be targeting. Specific information to be captured includes:

  • Who they are: You should know exactly who all potential participants are and how to contact and communicate with them.
  • Income: It’s best to understand the differences in needs of individual participant groups. Are the participants’ basic financial needs to be met, or are you targeting high-income people having more psychic needs?
  • Education: Account for literacy, general knowledge, etc.
  • Level(s) of involvement with the program: Assess all potential audiences, such as internal employees, channel partner employees, and customers.
  • Emotional needs: Understand how the audience feels about the program sponsor.
  • Capability: Assess the skill levels necessary to accomplish what you are requesting. If they do not have the skills to accomplish your goals, no incentive will help.
  • Impact: Be aware of other audiences who may have an impact on whether or not optimal results are achieved.
  • Motivational attributes: Assess what motivates employees – for example, are they motivated by extrinsic or intrinsic rewards, or some combination?

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Step 3. Perform Fact Finding and Involvement

Understanding the playing field is central – business conditions, internal issues, training needs, and marketing challenges not only affect the business, but also affect the program outcome. Your goal is to determine what obstacles to achieving the desired performance levels exist. Fact-finding and involvement with your audience – as well as other departments that support them – are key. The goal is to define all things that could go wrong so you have contingency plans in place where necessary. The involvement process should include some kind of formal input from the employee groups whose actions can make the difference. One common process is the so-called nominal group technique, in which an outside consultant conducts an open-ended fact-finding meeting with select representatives of the target audience to determine their views related to the program objectives, behaviors required to achieve them, and potential obstacles.

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Step 4. Establish the Program Structure

The program structure spells out in detail all aspects of the program, including:

  • Duration: When programs are too short, participant “buy in” can suffer. When programs are too long, participants can lose sight of the goals. Often, short-term program elements and longer-term elements are integrated to mutual advantage.
  • Qualification: Measures of results and the process steps needed to meet them should be specified in the program structure. Program structure also includes how you will track performance (units, dollars, points) and how participants will qualify for recognition elements.
  • Program Types: Understand the value of an open-ended program versus a closed-ended program, which limits participation.
  • Rules: Define all specifics related to who will participate and the enrollment process. Rules should also include the time period, qualification levels, rewards and recognition (including tax implications if any), and how communications and updates will be provided.

While developing the program structure, pay particular attention to issues of fairness, and whether the program should be team-based or individual-based.

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Step 5. Define the Communications and Training

Communications focus attention on the program and provide updates (reinforcement) to keep the program top-of-mind among your target audience. Thematic elements, an enrollment kit, and promotional products that reinforce the program (and get envelopes opened) should also be considered. Meetings, newsletters, individual progress reports, announcement letters, and public recognition components should all be considered. Training that will enable participants to achieve the performance levels you are targeting should always be a central consideration. If you really want to promote engagement in the program, ask the targeted recipients to enroll in the program in writing, either in print or electronically. Today, the Internet, or company Intranets, provide an ideal platform for sharing information about the program, individual performance or team progress toward the goal, as well as training tips and quizzes.

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Step 6. Establish the Rewards and Recognition Plan

Incentive and recognition awards should not be misconstrued as compensation – the goal is to distinguish the awards from normal compensation in order to ensure relevance to the program and not everyday work. Reasons for selecting awards that are non-cash based have their tenets in research (See “The Benefits of Tangible Non-Monetary Incentives,” by Scott Jeffrey, University of Waterloo). They include the following:

  • Evaluability: When properly selected, non-cash awards ignite the imagination in a way that increases their perceived value.
  • Separability: Non-cash awards enable you to distinguish the award from compensation, whereas cash runs the risk of being considered as part of one’s compensation.
  • Justifiability: Participants receive special satisfaction from non-cash awards because they don’t feel guilty about spending them.
  • Social Reinforcement: People are freer to talk about non-cash awards than they would if they received cash.

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Step 7. Develop the Budget

Closed-ended programs (that pre-determine the number of winners) are easier to budget, but limit participation. The budget process is obviously important for management buy-in and tracking purposes. Key aspects of budgeting include:

  • Line items for fixed costs
  • Determining award values
  • Setting up an award spreadsheet to estimate costs
  • Running “what if” scenarios
  • Using the safest estimates
  • Adding fixed costs to get the total

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Step 8. Define the Program Measures

Types of program measures include results measures and process measures. Results measures track the outcome, and the specific unit increases or decreases related to the goal. In an employee program, unit increases (or decreases such as reduced rework, reduced service calls, reduced call backs) are typical.

Key aspects of program measures include:

  • Number of measures: No more than 2-3 measures are appropriate.
  • Access to data: Define the data source(s) and/or support these sources with a method you can use to collect it yourself.
  • Weighting of measures: “Weighting” is required when you have multiple measures.
  • Development of the measurement plan: This area involves various steps that include the following.
    • Determine the processes and results to be measured in a numerical way.
    • Decide upon 2-3 related processes or outcomes.
    • Create a basis for comparison.
    • Develop unit measures.
    • Determine the value of each unit of improvement.
    • Determine the award level per unit of improvement.
    • Assign weights.
    • Account for improvements resulting from a decrease.

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Step 9. Establish Tracking and Administration

Collection and sharing of data is key to effective program design. The most important elements include:

  • Implementing the program business plan according to a timeline.
  • Having an up-to-date database of participants.
  • Setting up a simple system for data collection and reporting.
  • Sending out all standing and other reports on schedule.
  • Making sure all awards are distributed on schedule.
  • Running tracking reports to determine award redemptions and costs.
  • Calculating results and ROI.
  • Feeding back market or other knowledge obtained from the program.

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Step 10. Perform Analysis and Feedback

Qualitative and quantitative measures of success are what you’ve been waiting for throughout the program. Your goal is to:

  • Look at the program results against the business plan – try to isolate outside factors that could have affected performance.
  • Review actual results.
  • Take into account qualitative results such as participant feedback, impact on customer satisfaction, how the program led to improved internal customer relationships, etc. Often, intangible benefits of programs (although they are more difficult to quantify) outweigh tangible results.

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