4 Reasons Why Employee Incentives Must Be Tied to Performance to give Serious ROI

Paychecks give employees a reason to get up in the morning and go to work. But long-term motivation that results in top-level, efficient work comes from the desire to improve. When you incentivize employees to give their best, you’ll get better work. But you can’t just offer pay raises based on years served or subjective annual reviews — they have to be tied to performance that measured in a non-subjective way in order to be effective. Here’s why.

• Competitive Nature. Most human nature is driven by competition. When you define acceptable performance metrics your feeding that competitive tendency each of us have. People want to outperform their fellow workers, and they want to outperform their past level of performance, especially when there’s a financial incentive.
• Clear Path to Better Pay. Employees will respond when there’s a clear path to higher pay. When they understand what they need to do to reach the next pay level, most workers will do what it takes to achieve it. Incentivized performance creates focus on both sides of the equation.
• Quantified Praise Gives Motivation. A “good job!” is appreciated, but there’s no way for an employee to know what that’s really worth. When you quantify praise by actual measurements achieved everyone knows the value of that pat on the back. It can get very exciting when you tie some incentives with team performance, workers are more motivated to earn the praise.
• Under-performing Staff Are Put on Notice. When there’s a clear culture of a full day’s work for a full day’s pay, lazy workers are highlighted. Measurement systems that provide reward for good work will, at the same time, call out poor performers. They’ll help you know where you need to provide training and support for struggling employees, and they’ll help you get rid of those who refuse to do the job they were hired to do.

The phrase “you’ve got to spend money to make money” doesn’t just apply to capital improvements. When you reward performance based on measurements that every employee understands, you generate a stronger bottom line.

Read about a incentive plan that we successfully used for years!

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