||Every small business
wants motivated employees. They are more efficient and produce
better results. Using monetary and other rewards to improve
motivation is a simple idea, but doing it fairly and effectively can
The majority of small
businesses "distribute payments to whoever is the golden child of
the week," says Daniel P. Moynihan, a principal and senior
consultant at Compensation Resources in Upper Saddle River, N.J.
How can you create a
compensation program that motivates employees, results in a more
productive staff and is administered fairly and effectively? The
secret, it seems, lies in the details. Here are fours steps to
1. Establish an action plan.
While the goals that you want to achieve may vary from one project or
staffer to another, the process that you follow can be duplicated each time.
Andrew Birol, President of Birol Growth Consulting in Cleveland, breaks the
process down into the two most important details of any compensation plan:
(1) You must have a plan and culture that motivates less-than-top performers
to strive to do better. Communication is the key ingredient for the entire
program. Harvey Wigder, Principal of Fulcrum Resource Group in Newton,
Mass., points out that much of the program's success will hinge on people
getting a clear and consistent message and understanding the objectives.
"Obviously, everybody likes it if the company is successful and there are
plenty of profits that they can give out," Wigder says. "(But) at least if
people are communicated to and if the understand the ground rules, they know
that if things don't work they're not going to get incentives."
2. Be creative in determining
Before you launch the plan, decide the reward. If you've relied on bonuses
or profit sharing in the past -- and they work for you -- then, by all
means, continue to use them. However, Moynihan suggests keeping a notebook
on your employees to distribute these cash rewards fairly. Here you can keep
notes on their performance, both good and bad, throughout the year. That
way, you can reward people for longer-term performance rather than skipping
them because of a mistake they made last week. If cash flow is a problem --
as it is with many small businesses -- look to other ways to offer rewards.
In fact, some human resource experts believe that non-cash rewards can have
a greater impact for the employees. "All of the great behaviourists have
said that you have to go out of your way to recognize and just give praise.
That doesn't cost you anything to give praise. But if you do go out of your
way to give a non-cash reward along with that praise -- that's just gold,"
says Brent Longnecker, President of Longnecker & Associates in Houston. In
his own business, Longnecker has found that offering flexible working hours
and the occasional Friday afternoon off have proven to be great rewards.
With the extra time, employees can take care of errands and enjoy a full
weekend. On Monday, they return relaxed and ready to work. Regardless of the
reward you choose to give, both Longnecker and Moynihan point out that they
must be random and occasional. Once you start handing out gift certificates
on a weekly basis, they become and expectation rather than a reward.
3. Give employees rewards your
Part of the recognition factor in rewarding employees is your involvement.
If you want to send your employees out for lunch, then make the arrangements
yourself. "One of the coolest things that I've seen done is where owners or
executives of a company actually take on the job that they would normally
have their subordinates doing." Birol says. "If you're having a luncheon,
have the executives cook the food. Show by activity that you really are all
on the same team." It's also important when dealing with non-cash rewards
that you tailor them to the individual as much as possible. For example,
offering a movie buff and afternoon at the gold course might not have the
impact you were hoping for. "If you customize something to people's
preferences you'll usually get 8 to 14 times the value of what you paid,"
Longnecker says. He also points out that if the reward comes from you,.
their boss, it will mean that much more to your employees, even more than if
you had handed them a bonus in their pay checks.
4. Group rewards may be
appropriate, but don't undermine individual initiative.
One final issue is deciding the scope of your compensation plan. In a bid to
be fair and to keep the program simple, it may seem logical to offer group
rewards and to leave individual rewards for things such as base pay.
However, that can emphasize group achievement at the expense of individual
initiative. With that in mind, Birol says that a plan should ideally operate
on two levels, covering both individual as well as the group as a whole.
"You make one-third based on the individuals tangible performance, and the
remaining two-thirds based on the group accomplishing and achieving whatever
it was charged with doing," Birol says. "From there, you have everyone rank