Employee incentive programs work. When done right, an incentive program can mean the difference between coming out of this economic morass better positioned than you were when it started—or wondering how the competition got so far ahead of you. The reason they work is because they’re good for employees—and so they’re good for employers.

G. J. Hart knows this firsthand. As CEO of the 300-unit-plus Texas Roadhouse casual dining group, he explains that when his company takes care of its employees, he knows his customers will also be taken care of. “We invest in our people just as you would invest in anything else,” he said. “This is the only way to get returns. During times like these, when everyone is feeling the pinch, it is even more important to recognize and reward folks.”

Hart cites the incentive program Texas Roadhouse has for employees who spend the day in 36-degree meat lockers cutting the steaks that are served in the restaurant. Not only has it reduced food costs (because the meat cutters are motivated to cut more accurately) it has reduced turnover by two-thirds.

If you’re looking for that kind of ROI in your business, here are some proven facts why you should be using a well-designed employee incentive program—right now—in this difficult economy.

1. Well-designed employee incentive programs are concrete examples of employer recognition. They show that, despite the state of the economy, you value your employees so much that you’re willing to invest in them for the future. Even if that “investing” means handing out a $5 gift card as an instant reward for a job well done. Even an inexpensive program can demonstrate that management at all levels supports the efforts of employees as individuals—something that research, such as that by the Hay Group, shows is increasingly important, particularly to younger employees. Yet, according to McKinsey and Company, only 19 percent of American employers in the past year have adjusted meager budgets to accommodate employee incentives. Nearly two-thirds just cut costs. There’s obviously room for improvement.
2. They aid in engagement. While a more robust and transparent internal communication program is vital in today’s instant-information environment, an effective incentive program can contribute to getting and keeping employees involved and engaged in their company. Research sponsored by The International Society for Performance Improvement shows that incentive programs increase interest in work and motivation to complete tasks (15-percent increase), persistence toward goals (27-percent increase) and “thinking smarter” (25-percent increase). Studies of the rise of technology-based social networking, including one from the Forum for People Performance Management and Measurement at Northwestern University, have shown that today’s workforce increasingly defines itself as being a part of a corporate community in addition to a variety of social connections. Effective incentive programs can help strengthen the internal bonds of that corporate community connection.
3. They aid in retention. The U.S. Department of Labor tallies not only the number of American jobs lost in this recession, but also the number of jobs that are available and unfilled—some three million of them. Many employers are now down to the absolute minimum number of core employees who can keep the company functioning—and they should be aware that the competition may be recruiting them. With CareerBuilder.com pointing out that 19 percent of employed workers are actively considering getting a new job in the next year, retention should be high on every employer’s list of concerns. According to a Spherion Saratoga Institute survey that closely examines exit interviews, money is not necessarily the primary reason for employee defections. Often it’s the stress of doing the job of two or three former colleagues without receiving the leavening of recognition by their employer. Again, a properly crafted recognition program can go a long way toward providing that leavening.
4. They can influence that all-important equation of work-life balance. Top human resources leaders are reporting that perhaps the primary issue in employer-employee relations is achieving a balance between increased demands at work—often because of a reduced workforce—and the demands of life outside the workplace. Motivation programs do not have to be directed solely at the employee. They can be structured to help balance, even improve the work-life equation by providing incentives tailored to specific situations. Providing iPhones or BlackBerries can function as an incentive program even as they allow employees to check on work-related email off-site, while at the same time send photos of the 5th grade soccer match to Grandma. 
5. They (for the most part) shouldn’t be cash. Many so-called experts contend that employee incentive programs are just cash bonuses in disguise, but this is just not true. While cash can be an incentive for employees who are used to a pay-for-performance environment—such as sales or call-center activities—numerous studies have shown that for the majority of employees, a cash incentive loses its association with the workplace just weeks after the event.

Non-cash incentives, on the other hand, often become trophies—whether they’re large or small—because they represent an accomplishment and not just another paycheck. If your company wants to run both kinds simultaneously, do so; they’re not mutually exclusive. But recognize the value of the positive and lasting impression of non-cash incentives.

By now you may have guessed that we have a vested interest in promoting the effective use of employee incentives. We’re the Incentive Marketing Association and we have a number of additional reasons—and the case studies and facts to back them up—on our website at incentivemarketing.org. iBi

Brett Hatch is special markets manager at Maui Jim Sunglasses in Peoria,
and is a member of the board of directors of the Incentive Marketing Association, the leading voice of suppliers in the incentive marketplace.