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On the Edge: Does One Solve-All Incentive Solution Really Exist?
July 02, 2008
If incentive programs were stock, many companies would make lousy stockbrokers.
By Paul Hebert
If your stock broker advised you to put all your money into one stock, would you do it? Probably not. I'm guessing you'd probably fire them. It's pretty much common knowledge that diversification is the key to long-term growth and protection of your core assets (the theory behind diversification is that you reduce your risk by spreading out your investments across different companies, stocks, bonds, etc).
Your goal is to create a portfolio of investments—each with a different objective, goal and timeline. Some are long-term investments, some short-term. And some are growth-oriented to protect the principle with little risk.
Your performance strategy within a company is no different. However, it seems that in an effort to reduce costs many companies have been taking the opposite view.
The Neo Program
Instead of diversifying their rewards and recognition strategy to accommodate changing trends, companies today are consolidating. I call it the "Neo Affect." If you remember, the The Matrix movie trilogy character Neo was believed to be the "One"—the one person (solution) who could defeat the dominant machines and free the humans. Similarly, many companies are looking for their solve-all "Neo" incentive or recognition program.
The standard Neo program is complex: it typically has three types of "winners" (unit sales, percentage increase and some sort of satisfaction score), six different qualifying criteria with varying levels of recognition—some of which are subjective, others are not—and monthly standings reports calculated using the solution to Fermat's Last Theorem.
And while most of these initiatives start out with great intentions, the initial goals become lost as more components get added through meetings, e-mail streams and additional weigh-in. Everyone figures that since they're running a program, they'll just get this and that included too—and pretty soon they'll have their Neo.
The Portfolio Approach
Unfortunately, just as Neo didn't actually defeat the machines for the humans (he more or less brokered a truce), adopting an all-encompassing Neo program won't help you achieve your goals either. Neo programs are complicated. They confuse the audience and splinter attention, typically resulting in poorer performance than if nothing was done in the first place.
Rather than seeking to implement a one-size-fits-all, let's-cover-all-our-loose-ends program, smart companies create a "performance portfolio." Smart companies know that clarity and focus are key to aligning employee behavior. They take the time to diversify their efforts to reduce risk (confusion) and increase returns (performance).
But what does a performance portfolio look like? In general, things to consider include:
• First and foremost are your long-term investments. Think about the ties between recognition and culture. These programs are the foundation of your portfolio. If everything in the marketplace tanks, these programs protect your most important assets—your people. Don't adjust your position in this part of your portfolio very often.
• Think mid-term. Smart companies plan for the cycles and market conditions that have some predictability. What are your company and industry projections? Do you see a fall-off in the fourth quarter? Is the price of oil impacting your business? Can you plan and protect against these market changes by focusing behavior in one group or another? Do you have an ongoing platform for rewarding specific behaviors as the business changes?
• Create short-term programs and one-off programs. These programs are similar to taking a flyer on a share of stock. You only do it when you see a reason, and you don't ever plan on keeping the stock. It's a one-time occurrence and focused on a very specific stock with a very specific outcome. Each company has these needs. What business issues are you facing that are transitory? Are you facing short-term price pressure from a competitor, a spike in workload that is affecting employee morale, or installing new computer software that requires training and adoption?
Updating Your Portfolio
Just like your investment portfolio, you'll need to evaluate and adjust your performance portfolio on a regular basis. Just because you created the portfolio doesn’t mean it runs on autopilot. Check in regularly. Compare your portfolio to your current needs and market conditions. Are adjustments necessary? Did something change that would change your long-term strategy? Is the next year different than last year? What do you need to focus on to be successful?
Just as you set up long, medium and short-term goals, you should check in with your portfolio in the same manner. Check your recognition programs and long-term culture programs at least annually. Double check your other programs at least on a monthly/quarterly basis. And, for those one-offs, always conduct a debrief to see what you did right and wrong so you're ready when the next "opportunity" pops up.
There Is No "One" Program
Every company has multiple needs, objectives and goals. Aligning your employees, channel partners or consumers with those goals isn’t something a single program can accomplish. Create a portfolio of programs. Diversify your efforts. Let each program do what it does best—don't try to cram two pounds of objectives into a one pound program.
Paul Hebert is currently the Executive Director at Excellence In Motivation, Inc., (www.eim-inc.com) and is responsible for new client solution development. Over the past 20-plus years, Paul has worked with many Fortune 100 clients to develop non-cash reward and recognition strategies within an overall audience engagement plan. Paul writes a monthly online column for Incentive magazine on incentive industry trends, and he blogs about the incentive industry and how to best engage your target audiences at his own blog, Incentive Intelligence.
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