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3 unexpected benefits of pay incentives

Written by on September 18th, 2015.      0 comments

Posted by Carla Gilmour on 18 August, 2015

The link between offering rewards and improved performance is well known in the business world. However, beyond the gains in productivity, pay incentives can offer some surprising, yet positive action amongst employees.

Here are three improvements you can expect to see amongst your staff with the right reward programme in place. 

Reduced Absenteeism

Incentive programmes have been shown to reduce short-term downtime in employees. A study conducted by the University of Wisconsin found that teacher absence declined "significantly" and perfect attendance records increased from 8 percent to 34 percent.

When enacting these schemes, it is important to think through any possible ways a system can be exploited. A case from Harvard Business School exemplifies this point rather well.

Launderette workers were given an extra bonus for perfect attendance. However, the employees targeted for low participation were able to game the system by using sick pay in place of unexplained absence and doing the bare minimum to attain the incentive. This also de-motivated high performing staff who felt the scheme was inequitable.

The case shows the importance of having a well thought out system that is free of loopholes or opportunities for exploitation.

Better teamwork

Many reward schemes have a focus on the individual and their performance. However, a lot can be gained by adopting team-based pay structures of incentive.
 
pay incentives can increase teamwork amongst your employees
Pay incentives can increase teamwork amongst your employees


In a study conducted by Cornell University, pay-based rewards applied to groups saw a 20 per cent increase in performance amongst individuals. Workers became more efficient even with no change to technologies they were using in the manufacturing process. 

Part of the reason for the success of these programmes is based of the relationships within the group. If an employee is uninterested in the consequences for his or her fellow teammates, the system will not work, so it is important that a level of trust and respect is present amongst your workforce.

Lowered turnover

In simple terms, committed employees are more likely to stay with their company compared to unengaged workers. Research submitted to Performance Review Quarterly found that incentive programmes produced a 27 percent increase in persistence and a 26 percent gain in mental effort amongst employees.

On average, workers were 27 percent more productive when faced with a familiar task.

Engagement can be maximised in schemes such as share programmes. Employees that have a vested interested in the success of the company are far more likely to hold their roles for a longer period of time. If you are able to consistently reward your workers for discretionary effort, the effect will likely continue in the long run. 
 

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