April 15, 2008
Employees respond to informal and formal incentives
By Terry Murphy CLP
Manager, human resource development
One of the best ways to describe anything is to create it in a diagram or chart. The incentive chart that accompanies this article is a quick visual description of an incentive program’s possible components. They may be formal or informal. Formal charts are written and acknowledged by all participants. Informal ones are generally not written, but presented verbally. Incentives can be monetary, where the reward is a payout of money. Non-monetary incentives involve payouts, such as days off, a dinner, show or similar reward. Both types are effective. As noted in the chart, timing and frequency are considerations. Let’s look at the two categories: formal and informal.
Formal incentives are written out such as a contract, discussed in full and acknowledged with signatures. They are generally for more senior people and for employees who have decision-making power and can influence the work process and influence profitability. The incentives need to be set out in writing, clearly indicating the goal or the desired accomplishment. It must at the same time describe the reward that goes with success in achieving the goal. Remember, the goal must be clear, simply stated, achievable and measurable.
In future articles we will discuss different incentive plans and give some examples of how they might be structured. Incentive plans can be great motivators, but require some creative thinking. Everybody must realize that in general, with no profit improvement, there is no incentive payout. It is extremely important that everyone involved understands this point.
Terry Murphy can be reached by e-mail at terry@landscapeontario.com.
Manager, human resource development
One of the best ways to describe anything is to create it in a diagram or chart. The incentive chart that accompanies this article is a quick visual description of an incentive program’s possible components. They may be formal or informal. Formal charts are written and acknowledged by all participants. Informal ones are generally not written, but presented verbally. Incentives can be monetary, where the reward is a payout of money. Non-monetary incentives involve payouts, such as days off, a dinner, show or similar reward. Both types are effective. As noted in the chart, timing and frequency are considerations. Let’s look at the two categories: formal and informal.Informal
You may have a situation where a job is falling behind. You promised your customer that it would be done on time. Now may be the ideal time for an added push to get the job completed. All of a sudden, you can create an informal incentive by telling your crew that if they can complete this job on schedule, you will reward them with $100 cash, or a day off, or whatever other idea you may come up with. This would be an informal type and could use both monetary, if money is offered, or non-monetary if a day off is selected. One could combine the reward or give a choice.
Formal
Formal incentives are written out such as a contract, discussed in full and acknowledged with signatures. They are generally for more senior people and for employees who have decision-making power and can influence the work process and influence profitability. The incentives need to be set out in writing, clearly indicating the goal or the desired accomplishment. It must at the same time describe the reward that goes with success in achieving the goal. Remember, the goal must be clear, simply stated, achievable and measurable.In future articles we will discuss different incentive plans and give some examples of how they might be structured. Incentive plans can be great motivators, but require some creative thinking. Everybody must realize that in general, with no profit improvement, there is no incentive payout. It is extremely important that everyone involved understands this point.
Terry Murphy can be reached by e-mail at terry@landscapeontario.com.