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Incentives stimulate action, spur effort, encourage behaviors and provoke engagement. Throw the wallet over the fence and the heart will follow is a common expression. But incentives must be more than just money to be effective. Good incentive plans also incorporate elements of culture and foster alignment. They incorporate concepts like:

How are the incentives connected to business goals?

If the employee does more than the goal they will expect to receive a bigger benefit. This doesn’t need to be cash, but it sure helps if it is. The key is to calculate the benefits paid versus the costs and ensure that both parties win. Being stingy will cost you to lose top talent in the long run but then again, everyday shouldn’t be someone’s birthday.

What unintended bad behaviors can happen as a result of the incentives?

Risky ones. Your employees will behave to their rewards and sometimes that’s not good. Balance the incentives with clear communications and tight controls of compliance.

How meaningful are the incentives to the people they apply to?

If they don’t care about the benefits they won’t change their effort or performance. (You wouldn’t either). To get the most out of an incentive plan, treat your employees like customers and make sure your value proposition is sharp and on point.

A clear organizational design, practical titles, articulated roles and goals, further enhanced by incentives is a fundamentally solid formula for directing your resources.

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