Happy employees and satisfied customers are two of the invaluable benefits of an effective incentive and recognition program
By Chris Freeburn

Not long ago, an engineering and manufacturing company on the East Coast underwent the lengthy and complicated process of earning ISO certification. A team of nearly 50 employees from the company worked for more than eighteen months on the difficult project, often staying late and coming in on weekends. Finally, upon the successful completion of the massive undertaking, they were all ushered into a conference room, where the company's CEO grandly unveiled his expression of thanks and recognition for all of their hard work and extra effort: a pile of plastic coffee mugs. Needless to say, the response was less than enthusiastic.

"Soon, those coffee mugs became a facetious symbol of quality in that company," says incentive and recognition consultant Adrian Gostick, whose company, O.C. Tanner (octanner.com), was eventually brought in to help turn around employee loyalty and performance after the coffee mug debacle. "This notion of ‘Hey, I'm paying them aren't I?' just does not buy commitment these days and that's why companies that adopt this attitude can't figure out why their workers keep leaving."


Still, he notes that many companies that would never consider operating without a comprehensive business plan or sales strategy continue to put little thought, if any, into incentive and recognition programs. As co-author of the motivational guide A Carrot a Day (Gibbs Smith, $12.95), Gostick warns that businesses that don't take the time to reward their employees risk sacrificing their future in the current business climate, where the Bureau of Labor Statistics estimates that nearly one-quarter of the U.S. workforce changes jobs every year. "Recognition is the lifeblood of innovation, retention, and productivity," he writes in his best-selling book. "It's what keeps employees motivated during the tough times. And it's why they will still be devoted when things improve."

Determine Your Company's Core Values and Goals
It may seem obvious that before you can begin to reward and motivate your employees, you should figure out what values and goals you are trying to promote, but many times, businesses blithely skip this crucial step. As a startling testament to this fact, a recent Franklin Covey study found that only 44 percent of the employees surveyed said that they felt their employer had effectively communicated their company's goals to them.

Even the companies that do take the time to complete this important step often stumble. "You want to remember that your goal is to recognize and reward behaviors, not individuals," says Gostick, who has counseled both small businesses and Fortune 500 companies. "Every organization has its top performers, but that doesn't mean that employees at every level aren't living up to your company's core values. A common mistake I've seen in my clients is they build a program that just ends up rewarding the boss's favorite employees. This can breed resentment and erode morale."

Instead, the Salt Lake City-based O.C. Tanner encourages its business clients, when they are building their value and goals, to also identify specific day-to-day tasks that support these goals. According to Gostick, this strategy allows businesses to better reinforce what they are trying to achieve, while providing more opportunities to recognize those employees who are going above and beyond on more mundane tasks, like answering customer calls promptly or maintaining efficiency by keeping a well-organized workstation. Business owners are then able to recognize these employees with a little perk, such as a week of using a coveted parking spot near the front door or an afternoon off to pick up their kids from school.

Change Behavior with Incentives
"An incentive is a reward known to employees in advance that attempts to change their behavior in attaining a goal," says Doug Press, president of the White Plains, New York-based company The Incentive Group (incentivegroup.com). And while Press acknowledges that incentive programs are traditionally associated with sales promotions, he notes that they can be structured to address almost any workplace function from marketing to safety to attendance. "If, as a small business owner, you've ever said ‘I wish I could get my employees or customers to do blank,' just fill in the blank and an incentive program can be designed around it."

He contrasts incentive programs with those that target "recognition," which typically involve an honor or status conferred upon an employee for an accomplishment like length of service. The distinction between the two is more than semantic. A plaque or certificate that might be suitable to acknowledge an employee's tenure will not be sufficient impetus to get him or her to double their annual sales numbers. "That is the most common problem that small businesses face when setting up an incentive program; they underfund the rewards and then they don't get the results they were looking for," Press adds.

To properly motivate people to change long-held habits or crack into a tough new market requires more upscale items. The Incentive Group's online incentives catalog offers the kinds of big-ticket items-from jewelry to fine furniture to golf and ski vacations-that he says are necessary to really push employees to go above and beyond. "The most motivating factor in an incentive program is for the worker to aspirationally identify with achieving the reward. That feeling of ‘I have to have that' needs to be there for it to work," he says.

Still, Press acknowledges that many small business owners who would gladly reward their workers with these types of gifts often balk at the prospect of devoting large amounts of time and money to set up and administer an incentive program. For those small businesses that remain doubtful, however, it is important to note that most incentives programs, even those with modest goals, can often pay dividends far beyond the program's original intentions.
For example, the Indiana-based manufacturing company Workhorse Custom Chassis recently implemented a campaign to expand sales for their step van and recreational vehicle chassis business. To entice the nationwide network of dealer sales representatives to participate and recommend their product, they adopted a prepaid debit card incentive program run by the Atlanta-based incentive and recognition company, Performance Systems Group (achievacard.com).

As dealers from across the country gained new leads, they faxed the details into Performance Systems, which compiled the information into a marketing database while sending back an acknowledgment to the dealers. A debit card was then quickly sent out to each dealer, simultaneously activated and credited for each chassis that they eventually sold.
Not only did Workhorse quickly achieve its primary goals of jumpstarting sales, but the program also reinforced brand recognition and increased marketing reach as well. "The fact that we were able to establish a dealer database alone would justify the promotion," says Tony Monda, Workhorse's director of marketing. "Now we are able to contact dealer sales representatives directly with inexpensive broadcast faxes, and as we add their email addresses, send HTML emails."

Individualized Recognition
"Every employee is different," says Steve Harper, an entrepreneurship professor at the University of North Carolina, Wilmington. "What turns on one employee may be neutral to the second, and actually frustrating to the third, if the company is committing resources to a rewards program that could be incorporated into better pay." An incentive program designed without specific input from the employees who will be reaping the rewards is a coffee mug fiasco waiting to happen. To avoid this, Harper suggests making your employees "co-architects" of the plan. "Try the plan with a group of volunteers on a pilot basis," he says. "Learn from it. Get their input again."

If the non-scientific survey conducted in October 2005 by Dave Gray, founder and CEO of St. Louis, Missouri-based communication design company Xplane is any indication, Harper's strategy could be a breath of fresh air for employees. Gray found that 65 percent of those surveyed had no idea how-or if-they would be rewarded for meeting or beating their performance goals. The same study found that 52 percent of those employees surveyed planned on leaving their jobs within two years. Effectively communicating to your employees that they are working toward something, and that they have a say in what that something is, can engender loyalty and prevent costly turnover. Listening to what your employees have to say will also keep the incentive plan from feeling like a gimmick designed more for the sake of increasing productivity than showing appreciation.

For those business owners without the time or resources to develop an elaborate incentive program, Judy Papalard, vice president of sales for Card Express (cardex.com), has a solution. Card Express offers a product that gives employees the final say in how they're rewarded. For a low set-up fee, Card Express's customizable, pre-paid Visa and MasterCard debit cards let companies show their appreciation with a gift that can be used at millions of locations nationwide, making them much more flexible than a standard store gift certificate. "We allow our clients to print individual messages on the front of each card or brand it with their company logo as well," Papalard notes. "That way, when an employee goes out and uses the card, it reinforces company loyalty with the worker and, for the employer, it's like free advertising."

However you choose to reward your employees, Gostick's primary piece of advice is not to wait too long to do it. "Most turnover in companies takes place between the first and second years," he notes. "Yet, most small businesses on a tight budget might not formally recognize employees until they reach a sales level or service tenure that takes decades to build up." But by then, it is often too late. "You might think recognition is all about the past," Gostick says, "but it's really all about the future." And for a small business, whose most important assets are often its people, properly motivating and recognizing employees might just be the best method to ensure the future is bright.

Better Than Cash
Cash rewards don't make much of an impression on employees, a fact supported by a 2005 incentives industry study which found 60% of those workers surveyed viewed cash rewards as merely part of their normal salary, instead of as recognition for exceptional performance. A similar survey conducted in 1999 showed that 29% of employees who received a cash reward used the money for bills, while only 9% actually used it to reward themselves. So why not use the cash to buy them something they'll hold onto?


Employees fond of handing out business cards are a great source of free advertising. Encourage the practice by rewarding simple jobs well done with a stylish business card holder. In addition to storing the cards neatly, the cases help ensure that employees travel with a surplus of business cards, rather than the two or three that will fit in a wallet or purse. Holders are available for under $20 in an assortment of designs (giftsforprofessionals.com).

In the second quarter of 2006, 76% of Americans in the market for an MP3 became iPod owners. Chances are, you employ at least a few of them. While the iPod has already become the recreational gadget du jour, Apple has developed accessories to help make it even more irresistible. The iPod Hi-Fi Dock ($349), a home stereo unit that eschews CD players and tape decks for an iPod hookup, lets users give those ear buds a rest.

In a perfect world, there would be money in the budget to send an outstanding employee and their family on vacation. In an imperfect world, a day of fun still goes a long way. Paying for a day at a non-exclusive country club will give golfers, tennis players, or employees simply looking to lie by the pool a chance to do something they already enjoy for free. Giving them a Friday off to enjoy it will only add to the reward. Most country clubs offer one to three-day passes for around $300.


An employee who aspires, and achieves, beyond the call of duty should be rewarded in kind. An LCD flat panel TV, like the Sharp Aquos (46," $2,999) or Sony Bravia (46," $3,299), will act as a reminder of your employee's hard work-and your appreciation-every time they watch it. The set, a conversation piece if ever there was one, can also act as a status symbol and may be enjoyed by the employee's family and friends.


Chris Freeburn is an associate writer for Business 24/7 magazine