Incentive policies motivate behavior in a business context through reward strategies for employees and customers. There are three categories of incentives: financial, recognition-based, and special rewards. Incentive policies should be designed carefully to avoid creating a workforce that only performs well when incentivized. Companies may also use incentives to encourage healthier behaviors or community engagement. HR departments typically manage incentive policies, and creative design can lead to a happy and engaged workforce.
An incentive policy is any system adopted to motivate people’s behaviour. When applied in a business context, it is a company’s use of reward strategies to motivate employees to do or not do something that is usually beneficial to the company. A company may also employ motivating strategies to attract customers, but these programs are often called loyalty programs to distinguish them from employee incentive policies.
Incentives can take almost any form. The relevant consideration in designing an employee incentive policy is what type of motivator will encourage or reward behavior without encouraging bad habits. Encouraging behavior by providing an incentive can have the negative effect of creating a response that teaches employees not to do their best work unless incentivized. In that case, a company would have a workforce dissatisfied with their base salary and only willing to go beyond the strict parameters of a job description when exceptionally paid. The company then becomes trapped in a cycle that ultimately limits the company’s ability to maximize its human resources.
The three typical general categories of incentives in the employment context are financial incentives, recognition-based incentives and special rewards. Financial incentives reward work performance with a financial gain, such as a year-end bonus or stock options. Recognition-based incentives replace a pay-for-performance paradigm with one based on a prestige factor, such as an employee of the month program or a parking special. Special awards tend to occur on an ad hoc basis, rather than on a specific schedule or announced schedule, and involve the employee receiving something unique, such as tickets to a baseball game or use of the property for the company’s vacation. ‘agency.
Not all incentives are designed to help a company’s bottom line. A company can also design an incentive policy to achieve results other than an increase in labor productivity. Some companies have a goal to encourage their employees to adopt healthier behaviors or volunteer through the company’s community engagement program. In order to encourage workers to make these kinds of lifestyle changes, the company might offer any kind of special incentives.
If a company has an HR department, it is typically responsible for designing and managing the company’s incentive policy, unless the incentive is financial and closely tied to a financial barometer, such as sales. Creative incentive design can be the difference between a happy and engaged workforce and one that is disengaged. Incentive policies are always subject to a cost-benefit analysis, however, both in the specific results obtained and in the type of working atmosphere encouraged due to their availability.
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