After publishing my latest blog on strategies for successful organizational change, I wanted to explore ideas about creating good incentive structures for those difficult times of change. Successful initiatives often depend on having the right incentives in place because positive change is sustained when employees’ ‘right’ performance is recognized and rewarded – whether it’s doing something new or improving the old.
The most commonly used incentives are financial (salary raises, bonuses), recognition (public appreciation, accountability), and professional development (learning and career growth opportunities). Some incentives motivate employees more than others – and it’s not always the financial ones. Incentives are often planned and distributed at the individual level, but good planners also consider what meaningful incentives could be across the departments and organization, as well as building in more personal and spontaneous informal incentives.
When done well, creating an incentive structure in your change management plan can increase staff accountability and expectations, and inspire greater engagement and performance. However, when incentives are created quickly and haphazardly, it can actually work against you – creating additional staff confusion or resistance to change.
Designing an incentive structure doesn’t have to be complicated – it just has to be intentionally planned and fit your organization’s goals and culture. If you’re developing an incentive program, I recommend following these best practices.
Pay attention to organizational culture. Your environment is the most powerful source of both formal and informal behavioral signals – which can either work for or against you. In entrepreneurial cultures, you’ll want to encourage new innovative ideas and celebrate people tackling hard problems. In risk-averse cultures, you’ll need to create incentive structures that create a sense of psychological safety that support people taking chances and trying new things.
Determine high-level performance goals for employees and link the incentives to these goals. Identify what are the top actions that you really want people to take in support of the change? Trim it down to a handful of only what’s critical for success.
Communicate this info clearly and consistently to the employees. Make a direct connection between expected employee performance and the targeted behaviors; don’t assume they’ll make the connection themselves. If incentives are provided inconsistently or not explained, people will become confused and tune out.
Evaluate employees and departments using key performance metrics. The program incentives should be used in coordination with the organization's established HR management practices regarding how staff performance is rewarded and punished.
Adjust the incentive program based on performance and feedback, and communicate why. Tweaks to the plan are positive when they reflect back on what you’re learning from staff and leadership. You may learn from staff feedback that they want more professional development funds instead of one-time cash bonuses for positive performance. Based on this new info, you may decide to update your incentive plan.
From my change manager experience, here are a few examples of incentive structures I’ve seen work well.
Creating an optimal mix of different incentive types. Combining financial incentives with public recognition (non-financial) is an effective approach. Non-financial incentives do not have to be formal – when leaders give verbal and written recognition of effort and results, it can be highly motivating. Pride and public recognition are powerful incentives.
Competition incentives to stimulate friendly competition between different business units to hit group-based performance goals. You’d be surprised how well competition alone motivates some employees to outperform their peers.
Gamification incentive programs that are fun and social for the team.
Financial incentives that drive new behaviors like the following:
Team Performance Bonus that recognizes team contributions that have exceeded expectations and the scope of the team’s daily assignments. A critical point is to divide the bonus pool evenly among the team members.
Collaboration Pay Incentive to encourage employees’ to collaborate and share ideas and contacts within and/or across business units. This incentive is especially useful within sales units.
Innovation Spot Bonus Award for employees who present new ideas that are forward-looking and align with business objectives. Idea submissions are reviewed by the leadership team, and the employees selected would receive a one-time payment.