Money isn't everything. In fact, you may be surprised to learn, additional money isn't anything at all to some employees. I know this because I've heard more than one Chief Executive Boards International member say, "I don't understand it, but a good bonus program just isn't getting the attention I'd hoped for." In many cases these are bonuses for hourly or skilled workers, and usually not trivial -- say, $500 for beating a project estimate or for great customer satisfaction ratings on a job.
In one of those conversations, a member suggested, "Why don't you try offering a paid day off instead?" The response was easy to anticipate, "But I can't do that -- I'd lose a day of production." "Well, what if this caught on -- couldn't you hire another guy to cover for those taking days off because they did what you wanted them to do?"
Then we did the math. In fact, in most companies the hourly or skilled labor costs maybe $25/hour fully loaded (a bit higher in Union markets, where you can't give rewards for performance, anyway). So a day off actually costs you only about $200. If it's actually an opportunity cost issue (lost billings or productivity), you could pay someone else overtime to cover, and it would still cost you only $300/day for the same work. Tip: When communicating the value of a day off, you may want to play the opportunity cost card -- "Your paid day off costs the company not only your salary, but also $400 in revenue (@ $50/hour)."
The interesting part is your workers probably won't do the math. And somehow a day off with pay sounds a whole lot better to some of them than a $500 bonus. Studies have shown this to be a generational bias -- that Gen-X and Gen-Y (20-somethings and 30-somethings) employees are far more interested in time off than additional money. And, of course, the same could be true with some of your older employees, as well.
So, consider your audience when offering rewards for performance or behavior. Think about what they might value vs. what you might value, and couch your incentive programs accordingly. While you're doing that, also consider "spot" reward programs for people you just catch doing something good -- here's an article on how far a car wash coupon or Target gift card will go, particularly with younger employees: "How Much Employee Motivation Can You Buy for $10?"
If you've had some successes or frustrations with incentive compensation of your employees, please click "Comments" below and share them with others.
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Terry WeaverCEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
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