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Five Strategies for Designing Performance Incentive Programs That Work

1. Balance service and productivity. If you design an incentive program that rewards productivity, such as reducing call talk time, you will get that, but your service quality will certainly suffer. Likewise, rewarding quality only will result in a decline in productivity. Your incentive plan must balance both quality and productivity.

2. Set clear, specific, and measurable standards and expectations. Your incentive plan goals must be crystal clear to every employee and employees must understand how meeting the goals contribute to the overall effectiveness of the department and organization. If attendance and punctuality is a goal, for example, explain how critical attendance is to service delivery. “When one person is out, the call volume is more heavily distributed to those who are here and that results in longer wait times for customers and more stress on those taking the calls. Longer wait time translates into poor service, which can result in lost customers.” Employees need to know why each element of the incentive plan is important. Next, be specific with your goals. “In order to get the maximum points for attendance and punctuality, you will have no tardies, no late returns from lunch or break and no unexcused absences.” Explain also what type of behavior will result in meeting 50% of the goal and zero percent of the goal.

3. Set performance standards for individuals as well as teams. Giving employees opportunities to earn rewards based on their individual performance helps develop initiative and a sense of personal accountability. Individual performance standards can include such elements as attendance and punctuality, accuracy and professionalism, average talk time, and customer service delivery. Team performance standards encourage teamwork and set the environment for employees to work more cooperatively toward common goals. Team incentives might include rewards for all team members for total number of days entire group goes with perfect attendance or staying within monthly budget (for adjustments or other target).

4. Monitor and coach employees. I have never seen a successful incentive plan that did not include focused and consistent coaching. You will need to meet with your employees regularly to instruct, correct, and motivate performance, and to keep the momentum going.

5. Reward behavior often. Monthly or quarterly payouts for incentive programs are the most common and work effectively. Try not to go longer than quarterly, as the more often you reward the behavior, the more often you’ll get it.

Well-designed and well-implemented incentive plans are a great tool for improving the productivity and service level of your department or company. If you are already using an incentive plan, benchmark it against both the common pitfalls of incentive plans and the five strategies for making incentive plans work. This simple test will dramatically improve the strength of your plan. If you don’t currently use an incentive plan, I encourage you to give it serious thought to see if a plan might work for you.

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