November 29, 2018

How an Effective Incentive Strategy Can Help Fix the Employee Engagement Crisis


Gallup’s 2017 “State of the American Workplace” report found that 51 percent of US employees are not engaged, and a further 16 percent are actively disengaged. That leaves only a third of US workers engaged at work.

These findings are nothing new. It feels like every annual Gallup report tells us how low employee engagement and productivity are. The fact is, the industrialized world is going through an engagement crisis.

What’s surprising is this: The problem appears to be entirely fixable. Just consider the following figures:

– A CareerBuilder study found that 58 percent of managers have no management training at all.
– Gallup’s report found that only 21 percent of employees feel they are managed in a way that motivates them to achieve outstanding results.
– Despite these problems, incentive programs aimed at teams and individual workers can increase performance by 45 percent and 27 percent respectively.

These statistics tell us a few things. First, most managers get their positions by being excellent at their jobs, not by being qualified to lead. Second, most employees aren’t managed effectively, for which the previous point is likely to blame. Third, a smart incentive strategy is strongly correlated with engagement, productivity, and corporate success.

Many managers already believe that rewarding employees with appropriate incentives is a smart way to turn underperformers into valuable contributors. A 2017 WorldatWork report found that 76 percent of privately held companies have at least one long-term incentive plan. Spot awards, discretionary plans, profit-sharing plans, and project-specific awards all became more prevalent between 2015 and 2017.

As the engagement crisis continues to deepen, companies are spending more and more on reward plans and other tools aimed at turning things around. But how to craft an incentive strategy that will turn disengaged employees into productive workers?

Before we answer that question, we need to look at some more stats:

What Do Workers Actually Want?

Disengaged, unproductive employees are the norm, but it’s not because people are naturally unproductive. Looking at the “State of the American Workplace” report, several things are clear:

  1. Employees are rebelling against the status quo. They dislike the way they’re managed and the way they’re expected to work. They’re increasingly happy to leave their jobs and seek better opportunities.
  2. Money is important, but the most valuable incentives aren’t purely financial. Rather, they are more intangible things like paid leave, health insurance, and better retirement.
  3. A common thread throughout the report is a desire for flexibility. Forty-three percent of US workers now do all or some of their work remotely, and many workers value the ability to choose when, how,and where to work.

It’s clear that employees’ demands are changing. Disinterest and poor productivity result from companies failing to meet these new demands. It’s not that employees are inherently less productive and engaged than they were before. Rather, it’s that many businesses have yet to catch up to the new paradigm.

What can organizations do to adjust to this paradigm? There are three things to consider:

1. Flexibility as an Incentive

People in general and millennials in particular want more control over how and where they work. This is especially true in developed countries. For example, three in four UK workers prefer flexible work conditions. Many organizations understand this and do their best to give employees what they want. In fact, more than 50 percent of the world’s employees spend half or more of their work week telecommuting.

Unfortunately, flexible work is far from universal, and many companies have yet to start offering flexibility incentives. Gallup’s “State of the American Workplace” reports that 51 percent of employees would switch jobs if they were offered flextime. This means adding flexibility perks to your organization’s incentive strategy can keep employees happy and turn your company into an attractive target for future talent.

The specific nature of incentives in this category can vary. Some organizations might offer employees a day or two away from the office per week, others might offer flexible on-site schedules, and still others might let employees telecommute full-time as long as they remain productive.

No matter which way you look at it, flexibility should be a key part of the incentive strategy for any organization.

2. An Integrative Approach to Work and Rewards

We must consider two important characteristics of today’s workers. The first is that they seek jobs that give them meaning, fulfillment, and purpose. The second is they are ready and willing to look for better options elsewhere if a current job fails to satisfy their needs. Gallup’s “State of the American Workplace” reports a record 47 percent of employees feel the job market is full of opportunities, and 51 percent of workers are actively exploring these opportunities.

Given these conditions, boosting employee engagement and improving performance isn’t just about money — it’s about understanding workers as individuals and creating mutually beneficial productive relationships. For example, leadership and culture coach Christine Comaford reports that helping employees understand their role in an organization is one of the best ways to boost engagement. Anecdotally, many leaders are happy to reciprocate by learning how they can contribute to employees’ productivity and engagement levels.

The problem is that while the understanding is there, the processes aren’t. According to Deloitte’s “2018 Global Human Capital Trends Report,” the average organization rates its reward program with a net promoter score of -15. Only 21 percent would recommend their incentive strategy to another company. Most worryingly, only 8 percent of businesses said their programs were “very effective” at offering personalized, flexible solutions that truly reflect employee preferences.

It’s time for a change. “Fun” perks like ping-pong tables and concrete ones like money are useful, but what workers really want is to feel actualized and in control. They want to feel protected and to have peace of mind. This means making an effort to help workers understand what their roles are and paying special attention to what workers want for themselves. This kind of integrative approach is more hands-on, and perhaps more difficult, but it’s also key to keeping employees happy and effective.

3. Enabling and Empowering Employees

Implementing a good incentive strategy requires the adoption of new processes and software solutions, but the most important shift that needs to happen is a mental one. Employees today view themselves as partners, not work drones — yet many managers are still stuck in old-school mindsets and models that say it’s easier to replace a worker than help them succeed.

This is no longer true. Employees, especially skilled ones, are difficult to replace and increasingly ready to leave. Understanding them, giving them the tools they need to succeed, explaining their importance, and offering job flexibility aren’t just nice things to do — they are necessary for continued organizational success in 2018 and beyond. Fortunately, the costs of designing and managing innovative incentive management strategies that incorporate all of the above factors are offset by improved employee productivity and loyalty.

Sandra Lupanova is a technology observer at Itransition.

Read more in Employee Engagement

Sandra Lupanova is a technology observer at Itransition, a custom software development company headquartered in Denver, Colorado. An expert in team and enterprise collaboration technologies, Sandra guides companies toward effective employee engagement and productivity practices. She has a unique perspective on talent management strategies and offers hands-on tips on improving enterprise-to-employee relationships. Sandra is also keen on data visualization, art, and design.