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Do Financial Incentives Produce Higher Performance?

19th May 2015 | John G Fisher

Non-monetary incentives and recognition programmes are an area of employee motivation that is often overlooked. Yet, as John Fisher reveals in his new title Strategic Reward and Recognition, a strategic focus on non-cash rewards can generate significant return on investment for employee engagement, performance improvement and financial results. Here we talk to him about what motivated him to write the book and whether more money produces higher performance.

1. What motivated you to write this book?

I had written a practical primer about ‘performance improvement’ way back in 1995 and felt 20 years later that a more considered approach would be useful for those who ‘run incentives and events’ but wonder what the latest thinking is, and what organizations around the world are doing to improve their reward and recognition budgets.

2. Does more money produce higher performance?

Money satisfies the need to be rewarded for a job well done… a good day’s rate for a good day’s pay… but time and time again studies show that non-cash incentives such as travel and gift cards are actually more effective than cash in delivering higher performance. For example, a seminal study for Mazda Motors of America showed that non-monetary incentives can be up to four times more effective than cash in encouraging more sales.

3. Does recognition really work?

Employee recognition schemes sometimes get the reputation of being ‘nice-to-have’ and can often be candidates for being axed when corporate costs come under scrutiny. But this would be a grave error. When integrated within a brand engagement strategy an effective recognition programme can raise engagement levels by as much as 20 points. Using the accepted ROI model for employee engagement the additional improvement in engagement could be worth millions, even for a medium-sized organization. The Liverpool Victoria (LV) case history in my book is an excellent example of how employee brand engagement can make a big difference to the bottom line.

4. What do you think is the most effective way of communicating incentives?

Communication is all about your audience and the business context. What works and is acceptable for the pharmaceutical industry may be totally inappropriate for the electronics sector. But there is no doubt that the old-fashioned printed brochure is long dead and everything has moved online and is being promoted through social media and closed portals. That said, there is no substitute for face-to-face presentation. So all incentive schemes should involve some element of personal briefing, whether that’s a formal conference or a cocktail party in the local pub.

5. What are the difficulties of setting a reward and recognition budget and how can these difficulties be overcome?

The only difficulty is the belief from senior management to put such a programme in. You have to allow between 1%-3% of the participant’s average salary for the period of an incentive programme as an acceptable reward level, otherwise why would people bother? For recognition schemes the rewards tend to be less important than being able to promote corporate values on a consistent basis across the organization. Senior sponsors need to debate what compliance with such values would be worth to the organization… we are happy to work with clients to establish what they should be prepared to spend on shifting the behaviour of employees from average to great... it’s a brand engagement issue rather than ‘what’s in it for me’.

Strategic Reward and Recognition is available for pre-order now. Save 25% with discount code SRR25. Enter the code when prompted at the checkout. Buy here.

Strategic Reward and Recognition (9780749472528)

HR, Organizational Development & Coaching

Kogan Page publishes market-leading books on human resource management, training, learning and development, change management and coaching to help HR managers attract, develop, manage and retain staff effectively.

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