incentives may 2013

WII FM-the employee incentive radio station

by Toronto Training and HR

May 2013

CONTENTS 5-6 Definitions7-9 Purpose of incentive programs10-11 Types of incentives12-13 Dimensions of incentives14-15 Factors of incentive pay16-18 Principles of incentive pay19-20 Best practices for using incentives21-23 Executive incentives24-26 Conditions for effective use of incentive

programs27-28 Caveats for administration of incentive programs

29-30 Reasons for implementation31-32 Motives for profit sharing33-34 Possible conditions affecting the link between

profit sharing and earnings 35-36 Things to consider when designing incentive

programs37-38 Concerns around incentive programs39-40 How and why incentive programs work

41-42 Attendance incentives

43-44 Types of incentive companies 45-46 Measures to evaluate success47-48 The situation in Nigeria

Introduction

Introduction to Toronto Training and HR

Toronto Training and HR is a specialist training and human resources consultancy headed by Timothy Holden 10 years in banking10 years in training and human resourcesFreelance practitioner since 2006The core services provided by Toronto Training and HR are:

Training event designTraining event deliveryReducing costs, saving time plus improving employee engagement and moraleServices for job seekers

Definitions

Definitions• Bonuses• Incentives

• Incentive schemes• Motivation• Productivity

Purpose of incentive programs

Purpose of incentive programs 1 of 2

• Improve motivation• Tie pay to performance • Recognize differences in

employee performance• Increase competition

among employees• Attract and retain

productive employees• Reduce absenteeism• Reduce idle time• Reduce or control costs

Purpose of incentive programs2 of 2

• Utilize equipment more effectively

• Relate increases in compensation to increases in productivity

• Avoid additions to employees

• Create uniform processing costs

• Direct efforts toward achieving organizational objectives

Types of incentives

Types of incentives• Natural• Artificial

• Extrinsic• Intrinsic

Dimensions of incentives

Dimensions of incentives• What is being measured,

inputs or outputs?• What period of

performance does the payment reward?

• Does the payment reward an individual’s performance a or does it relate to team/organizational success?

• Is measurement based on a single factor or a multiple factor?

• What form does the payment take?

Factors of incentive pay

Factors of incentive pay

• Moral hazard• Adverse selection• Need to induce profitable

cooperation in organizations

• Need to counteract costly or unproductive institutional and/or regulatory constraints

Principles of incentive pay

Principles of incentive pay 1 of 2

• Insurance• Rationality• Certainty equivalence• Dual performance

measures• Risk premium• Intensity of incentives• Optimized performance• Efficiency in the evaluation

budget• Informativeness

Principles of incentive pay 2 of 2

• Equal compensation intensity

• Deferred compensation• Group compensation

Best practices for using incentives

Best practices for using incentives

• Achievable goals set by the employee

• Programming elements that address those goals

• Programming that is directed to an incentive type

• Utilizes both extrinsic and intrinsic reward structures

• Rewarding behaviours, not outcomes

Executive incentives

Executive incentives 1 of 2• Executives are risk-averse• Complexity and ambiguity

destroy value• The longer you have to wait

the less it is worth• It’s all relative-fairness is

fundamental• People don’t just work for the

money• The key motivation of a long-

term incentive plan is recognition

Executive incentives 2 of 2• Performance pay has a cost-be

sure you are getting value• Keep it short, sweet and

simple• One size does not fit all-know

your people and pay them accordingly

• Money is only part of the deal-and recognition matters as much as financial incentives

• Be realistic about how variable pay can be from year to year

Conditions for effective use of incentive

programs

Conditions for effective use of incentive programs 1 of 2

• Direct relationship between effort and output

• Readily identified units of output

• Even and continuous work flow

• Standards of performance• Quality standards• Measurement systems• Opportunity for cost

reduction• A good unit cost system

Conditions for effective use of incentive programs 2 of 2

• Sufficient financial inducement

• Reasonable time spans for payment

• Reliable stable technology• Selective application• Top management

commitment

Caveats for administration of

incentive programs

Caveats for administration of incentive programs

• Incentive punishes• Incentive schemes rupture

relationships• Incentive programs ignore

reasons• Incentive schemes

discourage risk taking• Incentive schemes

undermine intrinsic motivation

Reasons for implementation

Reasons for implementation

• Motivate employees• Increase sales• Increase brand exposure

and awareness• Support product launch or

promotion• Increase customer loyalty• Attract new customers

Motives for profit sharing

Motives for profit sharing• The substitution argument• The human capital

argument• The worker behaviour

argument

Possible conditions affecting the link

between profit sharing and earnings

Possible conditions affecting the link between profit sharing

and earnings• Employee participation in

decision-making• Establishment size• Pre-existing compensation

levels

Things to consider when designing

incentive programs

Things to consider when designing incentive programs

• Program cost• Return on investment• Ability to measure results• Program flexibility• Ease of use/time to

administer• Recipient experience• Redemption rate• Brand exposure

Concerns around incentive programs

Concerns around incentive programs

• Unethical actions• Pay inequality• Lower intrinsic motivation

How and why incentive programs work

How and why incentive programs work

• Incentive programs improve performance

• Incentive programs engage participants

• Incentive programs attract quality employees

• Long-term programs outperform short-term programs

• Executives and employees value being rewarded

• Quota-based rewards programs work best

Attendance incentives

Attendance incentives

• Attendance bonuses• Lotteries• Adjustments to profit-

sharing• Well-pay plans• Group-based approaches

Types of incentive companies

Types of incentive companies

• Full-service performance improvement companies

• Full-service incentive companies

• Incentive fulfillment companies

Measures to evaluate success

Measures to evaluate success

• Employee retention• Performance improvement• ROI• Sales increase• Media coverage• Brand exposure

The situation in Nigeria

The situation in Nigeria• Financial and non-financial

components of compensation

• Relevant incentive programs

• Type of incentives that do exist

• What should managers do

Conclusion and questions

Conclusion and questions

SummaryVideosQuestions

incentives may 2013

Business

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