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Rewards and Incentives - 18 August 2009

Over 60 percent of Australians drink alcohol every week. During this time, 13% percent of adults, or over 2 million people, drink excessively at a level that’s considered to be high in risk. This proportion of the population continues to increase each year, with a greater rise amongst women.

Alcohol companies use various rewards and incentives to entice you to purchase their products. These belong in one of three categories: financial, societal, and ethical. A financial reward might be an affordable price. A societal incentive might be a billboard showing how cool you’d be if you drank their beer. And an ethical incentive might be a new range of low-carb drinks.

Governments adopt the same three types of rewards and incentives to get you to drink less. A financial disincentive might be higher taxes. A societal one might be the policing of bars that serve drinks to those that are intoxicated. And an ethical one might be advertisements that educate people about the violence and health consequences of binge drinking.

When designing a rewards and incentives scheme for your employees, the same three categories apply. In order for your plan to work, it needs to target each of these areas.

Financial: This is the reward's monetary value. It needs to be sufficient enough to be deemed worthy of the extra effort you want from your employees, but keep in mind that a bigger reward does not equate to higher performance. There’s a threshold that’s reached where an employee’s productivity does not grow in proportion to the reward’s increase.

Societal: This is how your rewarded employees will look amongst their peers, which means that recognition is as important as the reward. It also encompasses the clarity of the expectations you set with your team as well as the strength of the culture you’ve built. The ultimate sign of an excellent team is one that doesn’t need carrots in order to work brilliantly.

Ethical: The rewards should be achievable for most of your employees. This is the biggest reason why ‘employee of the month’ incentives usually fail. They tend to motivate only the one or two people who actually have a chance of hitting the specified milestone. As much as possible, link rewards and incentives to outcomes rather than processes.

Rewards and incentives are only ever a short-term motivator. They rarely lead to sustained long-term performance. Intrinsic motivation, on the other hand, always does. It’s a bit like drinking alcohol. A glass of wine can be divine, but it’s nowhere near as fulfilling as the conversation and laughter you have when you share it with people you love.

 

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