Selling senior execs on the benefits of online incentives: show senior managers how a Web-based, noncash incentive program triggers elevated profits and productivity in their area of responsibility

HR Magazine, Sept, 2004 by Dave Dermer

* Frederick W. Taylor, a management pioneer, stated that existing reward systems were not designed to reward a person for high production. He observed an interesting phenomena. It seemed that once a worker realized someone producing less was receiving the same kind of rewards, the worker would also decrease his or her own level of production.

* Incentives helped increase individual performance by 25 percent, team performance by 45 percent, and motivated 92 percent of the participants to achieve their goals, according to a 2002 Study by the International Society of Performance Improvement.

Chief financial officer. Here is the door where most incentive programs are never able to get through. However, this area is where incentive programs should get the most support. Well-designed online, noncash incentive programs are primarily variable expenses with strong cash-flow benefits.

A well-designed online incentive program motivates the participants by allowing them to see the benefit of their accomplishments (points awarded to their account), while at the same time preserving cash that will only be used when the participants cash in their points. Your CFO will understand the cost savings that come along with the "breakage factor" (points never redeemed) of using the online communication tools instead of paper-based ones; and the ability to put in multiple incentive programs on one online system. However, timing is everything. Talk with your CFO long before the budget process is complete.

Some facts to share with the CFO are:

* Seventy-seven percent of the survey respondents agreed that employees often look at cash bonus payments as something they are due (Incentive Federation Study, 2003).

* Eighty-four percent of respondents believe nonmonetary recognition helped increase employee performance (Hewitt "100 Best Companies to Work For" Survey, 2000).

CEO/President. CEOs/presidents are used to a performance-based compensation program and would appreciate if others involved in the business have more "skin in the game." They understand the loyalty (i.e., future performance) that comes with giving a week-long trip to the Bahamas or a plasma television to a key customer(s) and/or employee(s). If the incentive program produces the desired outcomes, it will reflect positively on the CEO/president.

Following are some other facts that can help your discussion:

* In 2000, Bain & Company surveyed 451 executives from numerous countries on 25 management practices and found that executives were most satisfied with their pay-for-performance practices. Included in the 24 "runner-up" management practices were well-established practices such as outsourcing, strategic planning, total quality management, strategic alliances, customer-relationship management, re-engineering and downsizing.

* Mazda tested a traditional cash incentive program against a computerized merchandise and travel-based award program to see which would better motivate car salespeople. The cash program raised sales by only 2 percent above objectives while the merchandise and travel program produced sales 15 percent above objectives.