How To Incentivize Employees: Boost Morale and Motivation

The old ways of incentivizing employees are changing because how, when, where, and why we work are also changing. Sure gift cards and company sweatshirts are still welcomed, but these old perks may not have the impact they once did.

For example, instead of a fancy team dinner, Gen Z workers may prefer mentorship opportunities… Instead of a plaque on the wall, millennial workers may value a shoutout on the company’s social media… And instead of an annual bonus, nearly everyone would rather have remote work options.

Whether you’re designing a new incentive program or updating an existing one, here’s how to ensure your program achieves its goals.

• What are employee incentives?
• Why employee incentive programs are more important today
• How to create an effective incentive program
• How to identify what motivates your employees
• How to communicate and implement incentive programs
• Innovative and unique incentive ideas

What are employee incentives?

Employee incentives are rewards business leaders give to recognize hard work and influence certain behaviors. You might attract talent by providing flexible work options. You could show employee appreciation by sending flowers on their work anniversary. You could motivate people to achieve a safety goal by offering monetary payouts.

How you incentivize employees should be aligned with your company’s culture, goals, and budget. But there are inexpensive, and even zero-cost, ways to incentivize employees. Offering a prime parking space for a month, taking a repetitive task off their plate, and sending a hand-written note can all have a positive impact.

Why employee incentive programs are more important today

In North America, overall incentive budgets are expected to increase by 44% in 2023, according to an IRF study. “With stubborn inflation and ongoing workforce challenges, non-cash incentives are considered more valuable and impactful than ever,” said IRF president Stephanie Harris. Popular non-cash perks include gift cards, merchandise, and events.

Research by Deloitte show it’s worth investing in recognition programs. Businesses that recognize employees see a 14% boost in engagement, productivity, and performance over businesses that don’t. Such improvements help a business survive tough times. For instance, a 15% bump in engagement can create a 2% boost in margins.

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In line with the IRF study, the Deloitte researchers stated that employee incentives are more important today than in past years for several reasons:

• Unstable economy. Employees are handling the stress of heavier workloads as companies are freezing headcounts and laying people off until the economy rebounds. Incentives can motivate people to remain engaged and reduce turnover.
• Need for agility. Businesses must respond faster to changing demands. Incentives can entice employees to stay and attract talent with critical skills.
• Shrinking hierarchies. Organizational structures are flattening, which means fewer promotional opportunities. Incentives can increase job satisfaction as employees feel their hard work is appreciated and valued.
• Increasing technology. Regular work days involve more collaboration, knowledge sharing, and transparency than before between onsite and remote team members. Incentive platforms give employees an easy way to thank and reward each other, which may increase their connection with each other and the company.
• Younger generations. Millennials and Gen Z want more feedback and mentorship, as well as for their work to align with their personal beliefs and values. Offering incentives like contributions to their favorite charity and time off for volunteering can increase employee loyalty.

How to Create an Effective Incentive Program

A talent compensation report by Gallup found that the crux to making your employee incentive program successful is by aligning the incentive with an employee’s role and what motivates them. Hint: Think beyond money, especially for younger generations. Here are a few tips to keep in mind when designing your program.

1. Offer what you can maintain long term

Make sure what you offer during good times can still be offered during leaner times. Employee incentive programs must be "calibrated to a level that an organization can afford to spend in most years,” cautioned Liz Supinski, director of research and insights at WorldatWork. “Taking away or reducing an existing plan, other than in very rare economic circumstances, is very poorly received by employees."

2. Customize incentives to the person

Everyone has a unique personality and set of values and beliefs. So, you should reward employee performance in different ways. Some people may appreciate recognition through profit-sharing, others may prefer professional development opportunities, and some may value a gift card. The more you tailor the incentive to the employee’s personality, the more they’ll value the reward.

People’s interests are so diverse that digital awards platforms make it easier for large companies to tailor rewards to individual employees. Many platforms enable people to choose their own perks based on the number of points they accumulate. An added plus is remote workers can easily participate as well.

3. Keep it simple, clear, and accessible

An article by SHRM advises that a well-designed incentive plan should be comprehensive, but simple to understand. This will help employees understand what they need to do to earn a reward and how their efforts are calculated.

A plan should answer the following:

• Who is eligible?
• Will employees be rewarded based on their individual performance, their team's achievement, or the company's overall performance?
• How will performance be measured?
• How do the employee goals align with the company's priorities?
• How much will be offered? If it’s a monetary incentive, how will the money be distributed?
• How will the plan be communicated to workers?
• What does success look like based on the metrics?

As important, make the program accessible. Large companies have so many employees that they use incentive platforms to encourage team members to give each other recognition. Companies found that the easier they make it for employees to give kudos and share stories, the more they’ll do it.

4. Incentivize what you can measure

It’s good practice to make thanking employees a habit. But to be as fair and accurate as possible, rewards should be determined based on quantifiable factors. Employees may not participate if they feel a reward is only given to whoever the boss likes best.

Gallup suggests that for an incentive metric to be effective:

• You should be able to measure performance and attribute it to each employee
• They should be relevant to the most important responsibilities of a job
• They should be within the control of the employee
• They should be easily understood
• They should precisely identify different levels of performance

5. Consult, communicate, and promote

If you want employees to resonate with your incentives, ask for their input. Their feedback can help you design a program that generates higher engagement from employees and managers early on. After your program launches, be sure to explain why you’re doing it, how it works, and what’s in it for them. Then regularly promote it to encourage participation.

You should also communicate with managers so they know which company values to reward.

6. Don’t just reward top performers

Incentives often go to the best employees in a few departments, such as sales. But opening up who can qualify gives you a huge opportunity to ensure every employee feels connected to the business and boost employee morale.

A One10 survey shows that employees are 74% more likely to stay with a company when they feel valued for their contributions. So don’t just incentivize sales, but include everyone who plays a part in achieving your goals. This may be the hard-working client support specialists who help maintain the client relationships after the sales is made. And the remote customer service team who contribute to client retention by efficiently handling their day-to-day issues.

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7. Monitor for unintended consequences

When designing your employee incentive program, add in safeguards that prohibit negative behaviors such as gaming the system and sacrificing quality for quantity. Sometimes, employees become so focused on the prize that they don’t realize they shifted their work habits to increase their chance of winning. Intentional or not, those unwanted actions can negatively impact the work environment and derail business goals.

For example, if you’re incentivizing customer service agents to increase their call volume per hour, they may be tempted to move to the next call before fully resolving a customer’s issue. This may cause customers to call back multiple times, which could lower your service quality scores and increase overall call volume. And the extra effort customers must make could reduce repeat business.

Jennifer Albee at One10 suggests avoiding unintended consequences by checking in on your program at key intervals, then make adjustments as necessary. Albee suggests using an incentive platform to audit behavior and track progress. You could also send out short surveys, just be sure to keep them simple.

You could gauge shifts in behavior by asking these questions:

• After program starts: Do you know the rules for the incentive experience you are enrolled in? Do you know how to look up your progress on the leaderboard?
• Midway through: Have you changed your selling behavior as a result of the sales incentive? Do you feel the goal is attainable?
• Toward the end: What are you doing differently? Are you on track to reach your sales goals and win a reward?
• At the end: Did you achieve your objective at a reasonable price? Was the time and the energy required worth the reward you received?

8. Match incentives to the roles and goals

You can increase program engagement and avoid unintended consequences by setting the right incentives for the role. Gallup researchers suggest that in roles involving a lot of repetition, asking employees to hit a specific output goal by a specific time works well. But in a role that depends on innovation, such goals could have a negative effect. In this case, they may reduce creativity and experimentation, and tempt people to take shortcuts or invest in fewer iterations.

Also, be sure to match the incentive to what you want to achieve. Cash bonuses may be more effective for inspiring a team to hit their monthly sales goal. But if you want to increase employee retention, that type of short-term reward may not help much.

Along those lines, be mindful of how your program’s parameters align with the company’s values and beliefs. If the company prides itself on providing top-notch customer service, then incentivizing employees to double their calls per hour may undermine your larger goal to do what’s best for the customer. And your incentive may confuse employees as it runs counter to the company’s values and their job expectations.

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How to identify what motivates your employees

There are two types of motivation: extrinsic and intrinsic. Chris Drew, founder of the Helpful Professor, explains it this way:

• Extrinsic motivation occurs when you’re offered a reward for doing the task, or a punishment if you don’t do it. ‍

Example: You eat your vegetables because you’ll be rewarded with a dessert.

• Intrinsic motivation occurs when you do a task without any external incentives. Motivation comes from within and varies depending on a person’s beliefs and objectives.‍

Example: You eat your vegetables because you feel good when you do what benefits your health.

Many tasks require a combination of both quantity and quality, so Gallup recommends incentivizing employees with a program that “blends both intrinsic and extrinsic motivation, with a greater emphasis on intrinsic motivation.”

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When thinking of how to incentivize employees, consider the entire person including their:

• Age. Gen Z employees are more concerned with climate change and mentorship opportunities than baby boomers
• Lifestyle. Perks like free childcare are great—but only to people with kids who need it
• Workplace. Remote workers aren’t interested in an office party or a prime parking space

What’s more, a strong incentive program is balanced between encouraging desired behaviors and discouraging unwanted behaviors. Between producing quantity and quality. And between acknowledging the needs of a group and the individual.

To that end, researchers suggest reviewing your program metrics by determining:

• How much are incentives within the employee’s control?
• What is being de-emphasized by the incentives?
• Do incentives match the most important responsibilities of the job for your employees?
• Do they align with the business’s stated purpose, brand, and culture?
• How might your incentives influence team collaboration and customer service?

The Wells Fargo cross-sell scandal illustrates what can go wrong when an incentive plan is out of balance. To meet their numbers, an unknown number of employees (5,300 were later terminated) opened 2 million accounts without customer approval. What can motivate employees to do this? Outside observers cite several reasons, one being the financial incentive that differed according to the role. For example, personal bankers earned bonuses up to 15% to 20% of their salary.

You can avoid unintended consequences by remembering these additional three rules from Gallup:

• Financial incentives typically should be used for short-term motivation
• The greater the incentive, the more likely it will distract employees from other important aspects of their role
• Extrinsic motivations like pay should not overpower intrinsic motivations like purpose

It takes time to gather input and think through the risks and program rollout details. If you don’t have the bandwidth to do it yourself, you could contract HR specialists to help you with every stage from research and design to program launch.

How to communicate and implement incentive programs

You’ve invested a good deal of time and resources to setting up your incentive program. So, make sure it’s successful by communicating it clearly. You’ll have to do it several times to ensure everyone’s aligned with the program’s purpose. And that they trust it and are excited enough to participate.

Anna Straus, CEO at employee recognition platform Sparck, wrote that a program can roll out successfully if you follow these three steps:

Communicate it from the top down

Get buy-in from the executives down to the managers. Detail the how, what, and why so they can give your initiative their full support. “When employees see their manager and executives are all-in, their loyalty will easily follow,” wrote Straus. Next,

• Set a launch date and don’t change it
• Have a high-ranking person introduce the program by explaining why it was created and how it’s important. If it's rolling out companywide, have an executive do the talking.
• Promote the program through a Q&A session to answer questions and build excitement. Open the session with a program overview and explain the “why” behind the program again. Depending on the scope of the program and size of the company, you may have to hold multiple sessions to generate interest.
• Send a follow-up email a few days before and right before the launch. The email keeps it top of mind for managers and team members.

Identify your champions

Find people within the business who are passionate and excited about the program. These program champions should regularly promote the program long-term, drum up excitement across roles and functions, and garner a diverse group of participants.

Train management

If the manager can’t clearly explain the program details to their teams, why would they be interested in using it? Managers should be proficient in the program and how to use any related tools, or the program will fizzle. This may seem obvious, but in a Workhuman survey, most leaders (73%) said they didn’t receive best-practice training for employee recognition. By training managers, you’re seizing an easy opportunity to increase your program’s success.

Conducting all of the training and answering everyone’s questions takes time you may not have. You could take that off your plate by leaning on your program champions or contracting a specialist, such as an independent HR administrator or training specialist.

After educating and exciting everyone, remember to analyze and optimize. Throughout the program, audit for positive and negative changes in employee behavior and track key metrics. Be sure to monitor the program at every stage so that you can make the right adjustments that will increase your program’s success. For example:

• If you offer points for gifts, what are your popular items?
• Are you assigning the right number of points to motivate people toward your desired goal?
• How long do people remain engaged before their interest drops off?
• Which locations or departments are most active?

Innovative and unique employee incentive ideas

There are countless ways to incentivize employees with and without money. These employee incentive ideas should jumpstart your creativity.

Incentivize employees beyond traditional rewards

Begin with your company culture, resources, and guidelines for effective incentives in mind, then let your imagination fly.

• Sponsor a workcation. Pay for them to travel to another town where they can enjoy a change of scenery and a new work environment. You could provide an all-inclusive package that includes housing, transportation, and a coworking space.  
• Give on-demand assistance. Take some of the stress off a team member’s workday and reduce the risk of burnout by letting the employee contract independent talent. These external experts can handle repetitive tasks and projects that aren’t the employee’s core focus.
• Spruce up their home. Help them relax a little more at home by hiring someone to clean their entire house, do their yardwork, or fix something like a leaky faucet.

Incentive examples from other companies

Large and small businesses can use incentives to benefit employees, while also supporting the company’s culture, mission, and vision.

• Ben & Jerry’s free ice cream. Employees can take up to 3 pints of ice cream home every day. In case it seems too good to be true, the company put this employee quote on their website: “At first I thought there had to be a catch to this policy, but there isn’t! I bring ice cream every time I hang out with friends and family and get to try all kinds of flavors that I wouldn’t usually pick at the grocery store. It’s a dream come true.”
• Salesforce's "Volunteer Time Off.” Each year, employees get up to seven days of paid time off to engage in volunteer work of their choice. This may be helping a neighbor run errands, as “Employees are encouraged to use their VTO in ways that are personal to them.”
• Patagonia's "Environmental Internship Program." Employees may take up to two months away to work for the environmental group of their choice while continuing to earn their paycheck and benefits. When the company claims to “prioritize purpose over profit and protect this wondrous planet,” they mean it.

Incorporating technology and social recognition into your incentive programs

Help employees feel the company and their team members have their back—whether they work in the same office or across the country.

• Social recognition platforms. Through cloud, social, and mobile apps, anyone in the company can publicly acknowledge their peers, direct reports, and higher-ups. The tool makes it easy for people to share stories, acknowledge others, and give and redeem rewards.

• Online learning subscriptions. Employees can choose from a library of classes to enhance hard and soft skills at their convenience. Subscriptions can also be to services that support their personal interests too, such as access to exclusive documentaries.

• Gamify goal achievement. Using a digital platform or app, employees can set goals, track progress, and earn points or rewards as participants reach milestones. You can gamify nearly anything from a team goal to a wellness challenge. Most tools offer leaderboards, badges, and interactive challenges to add fun and encourage participation.

Getting it right

Incentivizing employees can do so much more than close a few extra sales deals at the end of the quarter. Incentives can strengthen relationships between employees and make people feel connected to the company’s culture, even when teams are working towards different goals.

But your employee incentive program can only achieve its short- and long-term goals if it’s designed and launched properly. And the pressure is mounting to get it done right. Because increasing employee engagement and retention is one of the top HR priorities of the year as workers are asked to do more on smaller budgets. And despite the mass layoffs and hiring freezes, the labor market is still tight.

However, you don’t have to figure it out all by yourself. Upwork provides a global talent pool of experienced, on-demand HR professionals ready to help you design, implement, and monitor your program. Visit the marketplace to see who’s available now.