It Can’t Be That Hard

Recently, I sat down with a friend that wanted to know more about what I did for a living.  He knew that I was in the incentive or performance improvement business and his first question to me was “Why would a company hire you?”  “I mean, it can’t be that hard.”  He’s right.  On the surface, it seems pretty simple to design a program, tell everyone about it, and then give them some prizes when they achieve the results.  Sounds simple, so why DO companies hire me to do what they could do themselves?  Well it’s not rocket science but there is some science to it.  There is also some art.  If you just wanted to give some people some prizes, then yes, you can do-it-yourself.  But don’t be surprised if you spend the money and don’t get results.

If you are able to identify the objectives you want to accomplish; create the rules that would achieve those objectives; target the people that have the power to achieve those objectives within those rules; engage them or grab their interest long enough to get them interested; motivate them to change their current behavior; keep them engaged over a long period until the objective is achieved; reward them when the achieve the objective and then challenge them to continue to improve their performance; identify which award is best suited to motivate them; capture all of the data associated with the program, the individual and the process; report back on all of the data and analyze what is working and what isn’t working and know what to change; and then, when all of that is done, determine if you got the return on your investment that you or your CFO was looking for.  If you can do all of that and know where the pitfalls are and what not to leave out of your program, then yes, you can probably do this on your own and it’s not that hard.

Most companies don’t do this for a living and outsourcing these tactical elements allows them to focus on results and collaborate on the strategy.  Like everything I outsource to someone, I could probably do it myself but I’ve learned that typically it will cost more and take twice as long if I do it myself.  Obviously the more risk there is in completing the task, the more likely I am to outsource it to someone that knows what they’re doing.  If there’s no downside to your program and you don’t mind spending the money and aren’t concerned about a return on the expenditure, then I would try it myself.  Otherwise, I’d get help.

Cash is King

Whenever you question employees or salespeople or distributors about what the most appealing incentive is to them, the answer is always cash.  In reality, cash is a poor motivator so save your research time and effort because the results are always the same.  By why not use cash?  It’s easy.  Participants can get whatever they want.  I don’t have to do anything different to hand out cash.  Cash incentives do have a place and a purpose.  If you consider all of the promotional efforts used to create a purchase of a product, cash is used quite often and for good reason.  Cash is best used when it is used as a replacement for a normal expenditure.  If you were going to purchase an item and there was a coupon offered for purchase of that item, that’s a cash incentive.  Sale items, bundling, couponing and rebates are all cash incentives.  You were going to spend your cash for the purchase and you saved your cash or were reimbursed.  Cash was replaced. 

Where is gets confusing is when cash is used as a reward for performance, not purchases.  Now it has crossed the line from everyday living expenses to achievement and relegated that achievement to a payment for services.  Non-cash awards have a staying power that the industry refers to as “trophy value.”  You’ll remember that trophy for years after the actual performance but you won’t remember what you spent the cash on.  There have been numerous studies on the use of cash and non-cash incentives (see The Benefits of Tangible Non-Monetary Incentives from the Forum for People Performance Management and Measurement at http://www.performanceforum.org/) and while cash is always requested, it underperforms other awards in cost and longevity.

When you are designing your incentive program, start by asking yourself what the participant is being asked to do.  If they are giving up earnings to purchase an item, then some form of cash incentive is best.  If they are being asked to increase their performance, to do something extra, above and beyond, then a non-cash incentive is best.  Easy to administer is not always the best solution and could be more costly in the long run.