Then there is the question of whether incentives should differ from rewards: the former being used to encourage good performance and foster a positive working environment, while the latter are offered as a bonus to employees who have already achieved a certain standard. This distinction is important, because offering performance-based rewards after the fact brings an incentive program much more into the area of ROI and accounting rather than focusing on employee satisfaction.
This reward approach results in a structure designed to minimize risk and maximize cost control. An example of this would be raising the value of a reward as team budgets are met. 'Recognition' type incentives are then in danger of being superseded by sales incentives, which are linked to the business performance, which are seen as self-funding because they generate an ROI.
The problem with recognition-based incentives is that they tend to reward only the sales side of the company, where value to the business is more easily quantified. Singling out one segment of staff in this way goes against incentive theory, which stresses that all employees deserve the same level of satisfaction in their jobs. With ROI-based rewards, it becomes harder to get approval for programs aimed at non-sales teams, whose impact on the bottom line is less obvious.
A focus on rewarding one-off successes can also be a short-term strategy that ignores the importance of creating employees who are ambassadors for their company. One way to ensure all employees are recognized is to watch out for opportunities to reward loyalty and extra effort over the long term. Examples could be recognizing milestones in length of service or in personal events such as birthdays, weddings and the births of children, or singling out people who contribute constructive suggestions for changing the workplace environment.
Once you have decided whom the incentives should go to, how do you decide how much to