Employee incentive programs are a way of compensating and motivating employee performance with pay and benefits. Most research proves that it’s not money alone that inspires employees to do their best. We therefore asked top business professionals and performance improvement experts what kind of employee incentive programs work best for them. Here are their recommendations.
1. Give Top-Rated Employees First Choice on New Jobs
Derek Christian, Owner, Handyman Connection of Blue Ash
We have tied all of our incentives for our technicians to the feedback they get from our clients. After every service, our clients get an email asking them to rate the service they received. As the ratings come in, the craftsmen with the highest ratings get a bonus and their first choice of new jobs as they come in.
This system has focused all of our craftsmen on making sure our clients are delighted by their experience with our company—which drives more repeat business and referrals.
2. Invest in Learning & Development Programs
Marielle Smith, VP of People, GoodHire
Learning and development programs can be excellent incentives for employees to improve their performance, and investing in these programs is a win-win for both the employer and employee.
The employer gets more value from a highly trained employee, and the individuals benefit greatly because they are up-leveling their skill set, which often leads to increased satisfaction in their role and will definitely help them be more marketable for future employment.
At GoodHire, we have the most extensive call support agent training program in the industry, and several employees who started as hourly-paid agents have successfully moved up within the company to sales, customer success, IT, and engineering roles, where they are in salaried positions with full benefit packages.
3. Share Profits Equally
Steven Sashen, CEO, Xero Shoes
We have a profit sharing program where the amount allocated gets split equally among all of our employees. When we introduced it and made the first payment, morale was clearly affected (positively) and productivity improved.
4. Tie Bonuses to Projects
Davis Lin, CEO, Client Acquisition Lab
I usually work with contractors/freelancers on a project to project basis for my own business. To incentivize them, I use a project bonus. If my contractors/freelancers can complete the project within the specified time frame and meet all my project requirements, I would pay them an additional bonus. By implementing this incentive program, I notice that I am getting more and more projects completed on time.
5. Reward Employees Who Meet Their Goals
Marc Prosser, Fit Small Business
Managers who give vague feedback create employees who just maintain the status quo. After all, if everything is going well, why do anything differently? Assigning measurable goals to employees and then tracking and rewarding their performance is more motivating and makes a greater impact on your business. Zoho People lets managers set goals, identify key result areas, and give 360-degree employee feedback. Employees can also anonymously review each other and assess and update their own skills. Try Zoho People for free.
6. Implement Key Performance Indicators (KPIs)
Kean Graham, CEO, MonetizeMore
We implemented a key performance indicator (KPI) system in accordance with our management and workflows using the following color system:
Yellow: Room for improvement
The green KPI range is the best score and the red KPI range is the worst. If the team hits yellow, they must discuss internally how to improve the KPI score. If it’s red, they have to urgently make changes to improve the score for the next project.
Team members were demotivated from not being provided clear and transparent goals. Since implementing this KPI system for the company and each team, we’ve seen better collaboration within teams, more innovative thinking, greater work ethic and improved morale with increased transparency. Team members are part of a team that is working towards a clear and common goal. The KPI system has been one of our best company innovations in our history.
7. Share Net Billings
Zack Schneider, Partner, FIFTEEN
If someone on the team brings work into the shop, we share three to five percent of all net billings on the account for the first three years. We don’t have a dedicated new business or sales person on staff, so it’s important everyone—from interns to senior leadership—understands the importance of being a brand ambassador for the agency and helping it grow. Our success is their success. The idea is not just to incentivize the team with a sale, but also help in making the account more efficient with a higher quality of work.
We know it works because we’ve had our team members bring us opportunities that may never have been available through my and my partner’s networking relationships. I’m always happy to write these checks because they show I have an engaged team that has taken a personal interest in the agency’s success.
8. Sync Bonuses to Customer Upgrades
Jay Labelle, Owner, The Cover Guy
Our employees are paid very well for our industry—better than most. We have been able to retain a great core group in our office. The two factors that increase our profits are increased sales year over year and profit margin. Our incentive program is completely set to these two performance indicators. Our incentive programs are 20 percent increase in sales year over year, and there is a bonus for upgrades added to each (customer) order.
The interesting thing is these upgrades are wanted by the customer, as we see from our online sales performance. So, often it is just a matter of asking if the customer would like the upgrades.
We continue to observe in our analytics that our year over year numbers are hitting our goals. We also know it’s working because we are paying out the bonuses. The performance program success rate is very high—it’s great for the company, the employee, and the customer.
9. Make Quarterly Incentives Unique to Each Employee
Georgette Blau, President, On Location Tours
Every employee is incentivized in a different way, so we have different ways of incentivizing, from money to gift cards to extra time off to short vacations. We follow very closely with written goals that are anywhere from a two-month cycle to a year-long cycle, but not generally longer than a quarter long.
10. Offer Great Benefits
Laura Handrick, Fit Small Business
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11. Show Heartfelt Appreciation
Roger Morgan, Founder & CEO, pawTree
Money and other forms of remuneration are definitely drivers and important, but I have found the most immediate, and also the longest-lasting, tool to drive employee performance is showing a genuine, heartfelt appreciation for people’s efforts, coupled with sincere compliments that reinforce the behavior you desire most.
You know it’s working when you have long-tenured, loyal employees who produce the results you are looking for.
12. Ask Employees for Feedback
LaTaunya Howard, Founder, Howard Corporate Centre, LLC
Although specific approaches can vary from employee-to-employee and from position-to-position, I have found that a simple yet effective way to motivate employee performance is to ensure that they fully understand how their work supports the overall mission and functioning of the organization.
In essence, all employees want to feel valued and want to feel that their work has meaning, and keeping this top of mind through open and on-going communication goes a long way in gaining employee buy-in and building a team that is vested in seeing the organization succeed.
I find it useful to get feedback directly from the employees, either via one-on-one discussions or employee surveys. I also encourage employees to provide their own self-evaluation during performance review periods, which helps employees to look at themselves and their position critically and to identify ways to improve performance and motivation, if needed.
13. Provide Both Financial & Non-Financial Recognition
Mike Fleming, CEO, Magic Murals, LLC
I encourage exceptional employee performance in a number of ways, both financial and non-financial. On the financial side, all Magic Murals employees participate in a profit sharing program. I generally distribute those funds right before the holiday season when they appreciate it most. I also provide monetary bonuses throughout the year to employees who have gone above and beyond the call of duty. Not only do my team members enjoy the cash, but they appreciate the recognition.
On the non-financial side, I make sure that all employees are recognized within the organization for their exceptional performance. That public recognition might happen through an email announcing the completion of an important project or a big sale and identifying the employees who contributed to it. It might also happen at a regularly scheduled team meeting (complete with lunch). I also make sure to personally thank everyone for the work they do and for the contributions they make to the company on a regular basis.
Perhaps the biggest incentive program, however, might just be the corporate culture at Magic Murals. We’re a team of fewer than twenty people; we all know each other well and we feel like family. Everyone works hard, helps each other out even if it isn’t their job to do so, etc., because that’s what families do.
It’s clear from the feedback during profit sharing awards that those cash incentives are appreciated. Throughout the year, I will occasionally hear employees reminding others that “we have to get this done as soon as possible—we have a profit sharing program, you know.”
To me, that’s a pretty good indicator. I’d also say that our employee attrition rate of zero, even as unemployment in our area is at record lows and jobs are more plentiful, is a great indicator of success.
14. Use Meetings to Track Goals & Performance
DJ Taylor, Owner, Coach DJ Taylor
To track personal goal progress, I will meet with coaches individually to make sure they are on track with their goal/outline. Certifications and courses normally give immediate feedback (pass/fail). We meet once a week with our general manager and front office to see and hear financial projections and outlooks as well as how each coach has contributed.
I personally encourage our coaches to have an overarching project/goal. These goals revolve around specific career tracks as well as our outlined facility goals/requirements—financial and otherwise. Occasionally, this means hosting certifications and bringing specialists onsite or setting up trips to offsite events. Seasonally we will have performance-driven bonuses.
15. Reward Your Staff with a Share of the Profits
Max Robinson, Owner, FishTankBank
The profit share model that we currently use is by far the best employee incentive program we’ve ever devised. It encourages our employees to put more into their work because they know they’ll get more out of it. Everyone in the business will get the same amount regardless of their position.
Rewarding our staff with a fixed percentage of the profits eliminates the need for targets (which I’ve often found can simply cause rivalries between employees). It’s really helped to make the team feel united too—which is a benefit I didn’t expect. We now have monthly profit share meetings.
16. Provide Performance Bonuses in Addition to Profit Sharing
Yungi Chu, Owner, HeadsetPlus.com
I’ve been a business owner for the last 30 years. I’ve always offered incentives in terms of monetary rewards:
- Bonuses for employees of the month is an example
- Bonuses for few or no mistakes made in the previous month
- Top salesperson of the month bonuses
The best one is when an employee stays with the company for two or more years, I add them to the company profit sharing program. The longer they stay, the more profit sharing they receive in return. This way, the employee feels like they have ownership in the company. This has worked well for me and my business the last 30 years.
17. Give Time Off for Volunteering
Tyler Butler, Founder & Principal, 11Eleven Consulting
Providing both internal and external volunteer offerings for your team can be a powerful incentive. Businesses run lean teams, and those that do so often need eager beavers to lead grassroots projects such as Take Your Kid to Work Day.
These types of experiences provide great satisfaction, as you have the opportunity to conceptualize an interactive offering that will benefit employees and their families in a powerful way. This purpose-driven activity will have a wide reach and leave a sustainable footprint on the business regarding the meaningful work you lead.
18. Offer Better Options for Health & Wellness
Trevor Longino, CEO, Unito
Here’s what we offer (as an incentive program):
$1,000 a year in “wellness spending,” to be spent on self-improvement, gym memberships, bike rental services, etc., in addition to private health insurance.
Unito is based in Montreal, and we’re a pretty small startup surrounded by a lot of bigger ones. Attracting talent requires a better approach to incentives.
19. Share Your Founder’s Expertise
Lindsey Handley, Founder, ThoughtSTEM, LLC
Our employee incentive program is rather unique. It can be difficult for us to retain after-school program employees, since after-school programs only run during a very limited amount of time after school (around 2:00 p.m. – 4:00 p.m., Monday – Friday). So to incentivize employees to stay with us, we’ve started providing free adult computer science education workshops to our employees who are interested in becoming even more computer savvy.
The workshops are taught by our CEO and my co-founder, Stephen Foster, who has a Ph.D. in computer science. Our employees are learning advanced computer science concepts that are usually only taught at universities.
20. Provide an Unexpected Treat
Steve Pritchard, Founder, Cuuver.com
I’ve always found that employee incentive programs work best when they aren’t too rigid. I don’t like having a set system that says employees will get a particular bonus when they achieve a certain amount of sales or results. The incentive should feel like a special treat for achieving something special; it shouldn’t become something they expect to receive as a matter of routine at the end of every project. I want my employees to be motivated by creating success for the business, not the incentives that come with achieving it.
So, my incentive system is that sometimes, after a particularly good week or set of results, I treat my team to a relaxed afternoon of eating pizza for lunch with a couple of beers while watching their favorite TV shows. This gives them a nice relaxed afternoon off to reward them for dealing with their work and any of the stresses associated with it.
I don’t do this too often (as that would devalue it), and I don’t schedule it either (as then it becomes too rigid), but occasionally I will tell them that we’re going to end the week with some downtime. This way, the team knows I will reward their efforts if they go the extra mile, incentivizing them to work harder, without the reward becoming an expectation or an obligation, and without them working directly for the reward rather than the business’ success. It might be a far cry from the formal incentive programs we see at most companies, but it works.
21. Host a Team Getaway
Jeff Butler, CEO, JButler International
For sales teams and for non-sales teams—if a team meets quarterly goals, we have an end retreat or getaway. The “getaway” must appeal to the majority of the team. That way you get an incentivization plan as well as a team-building event at the end of the year.
22. Give More Frequent Bonuses & Raises
Rochelle Graham-Campbell, Co-Founder & CEO, Alikay Naturals
Our incentive programs are bonuses and raises given in quarterly performance reviews. We are open and receptive to feedback as a way to thoroughly understand what is being shared by the employee during these reviews. More than just a score, quarterly performance reviews offer an opportunity for both management and the employee to learn more about what changes can be made or to discuss problem-solving.
We measure the success by analyzing the overall performance of the employee in the following quarter by putting in place measurable goals for them to meet. It is important that the goals are strategic and clear to ensure that the employee understands what is expected of them and how those expectations fit into the overall goals that we have set forth for the company.
23. Create a Priorities Measurement System
Grainne Kelly, Founder, BubbleBum
We have a priorities measurement system. We set objectives together, and every week set five priorities with completion dates which are then moved to the completed list when achieved. This is measured both as an individual and as a team. If you do not achieve your priorities, you are letting your team down.
We have a very strong set of values that all of the team have contributed to in writing, and I believe that these are what give our team their sense of belonging. We focus on helping each person be the best that they can be—always excellent, never average—and challenge their abilities in line with this.
24. Let Teams Share Their Achievements
Stefan Debois, Founder & CEO, Survey Anyplace
During the weekly meeting, which is best on a fixed time slot on Monday morning, we have each team present their achievements from last week, their tasks for next week and important issues that other teams can help with or need to be aware of. If you have a smaller company, the “team” can also be a single person.
We know it is working because we have seen performance increase since the moment we formalized this process. Also, employees and team leads have themselves indicated that they have adopted a way of working with a higher GTD-degree (Getting-Things-Done), thanks to the commitments that they make on a weekly basis during the meeting.
25. Provide a Compelling Mission
Josh Wadinski, Founder & CEO, Plantioxidants
After working at and with several Fortune 50 companies, I learned what strong incentive programs look like for established companies. Most of those financial components are baked into Plantioxidants (e.g., competitive salary, very strong health and dental benefits, vacation, and a modest life insurance policy).
So, outside of financial components, a key incentive for a start-up or small business is the mission itself. You want to find those who are excited about the world you are trying to create and excited to help get us all there.
In turn, the incentive becomes the mission, and performance becomes the insatiable challenge of accomplishing it. At Plantioxidants, the incentive (my own included) is driven by a passion to help others lead healthy, sustainable lives. Lastly, I implement bi-annual reviews to ensure that my employees are still motivated and incentivized, both financially and as it relates to our joint mission.
I make a concerted effort to talk to employees about where they want to be in three and five years shortly after they start, and I keep that in the back of my mind as we grow. Even if they are not working at Plantioxidants in the future, I want them to accomplish their goals and fulfill their dreams. Candid initial check-ins, along with at least two reviews per year, are great ways to check if employees are incentivized (again, under the assumption that the incentive is working hard to accomplish the mission).
BONUS: Give Away the Company
William Gadea, Creative Director and Founder, IdeaRocket LLC
We’ve gone a bit farther than just setting up a bonus program. My plan is to give away a third of the company to employees gradually over the next ten years, at which time I expect to retire.
At that point, the employee holding company we’ve set up would begin to slowly—perhaps over 20 years or so—purchase the rest of my stake. So yes, I am giving a portion of profits to employees now. But along with that is the prospect that they will one day own the company themselves.
It has truly changed the culture here: the employees have a more long-term view of their association with our company now, and they act more as owners. It’s been a win-win.
The Bottom Line
You may have noticed a theme in these incentive programs—they’re focused on what the employee wants in terms of profit sharing, time to themselves, more time with family, or a future in the business. Thus, the best employee incentive programs are not always cash bonuses, which are given and soon forgotten, but incentives that add real value to the employee over the long term. What incentive programs do you offer? Please share in the comments!