When employees feel genuinely appreciated and recognized for their contributions, it leads to increased productivity, improved morale, and lower turnover rates. Meaningful employee incentives create a win-win scenario where both the organization and its people thrive. Understanding the true ROI of these incentives helps businesses make more informed decisions about how to invest in their workforce to drive growth.
Why employee incentives are on the rise
Many team managers and HR representatives consider employees to be the cornerstones of every business. Talented and ambitious employees bring know-how, experience and creativity to the table.
However, the past years have shown to be difficult to navigate, featuring changing work habits such as remote and hybrid work, quiet quitting and a fast-paced digital landscape. Gallup states that $8.9 trillion is lost in global GDP due to low employee engagement. The employees’ ability to emotionally commit to an organization and work together as a team is a key component in any successful business.
Given all of the above, organizations are increasingly adopting incentives to enhance employee happiness, health, and productivity. Let’s dive into some of the benefits.
Why are employee incentives beneficial?
Before we dive into practical examples, here is an overview of the advantages of employee incentives.
Higher engagement: Recognized employees feel more engaged and motivated, and stay more loyal to the company. This is crucial in the modern business world, when people tend to switch jobs more freely to increase their salary and status.
Higher productivity: As motivation increases, so will productivity. Employees who are rewarded for their hard work tend to go the extra mile, both in terms of collaboration and innovation, which is great for company growth.
Cost efficiency: High employee turnover does not only impact daily operations but also leads to increased costs, since it’s expensive to recruit, hire and train new employees. Other members of the team tend to evaluate their own work situation when a top performer decides to quit. They might start looking for new work opportunities themselves. On the other hand, engaged employees are more likely to stay with their companies long term. Organizations that prioritize a collaborative and positive work culture significantly lower turnover rates. By creating an environment where employees feel valued and connected, businesses not only attract top talent but also retain it, ensuring long-term success and stability.
Reduced absenteeism: There will always be employees missing work due to illness or personal issues. An increased and disproportionate level of absenteeism is a sign of an unhealthy and disengaged workforce. These signs could also be foreshadowing a higher risk of employee burnout and long term sick leave.
Higher absenteeism often results from negative workplace practices such as unsupportive management, unclear communication, lack of wellness programs, and a culture that neglects work-life balance. By fostering a creative and motivating environment, businesses can minimize absenteeism while promoting overall organizational success and employee well-being.
What types of incentives are there?
A well-functioning and thriving workplace offers employees the following:
- Fair compensation
- Workplace safety
- Employee benefits
This means that financial incentives such as bonuses and salary increases are not enough. To enhance employee satisfaction, organizations must provide a meaningful work environment and a great work-life balance.
Incentives through employee recognition
Well-structured and personalized employee recognition is crucial to increase employee productivity and satisfaction. Gaining recognition is partly about receiving proper feedback and being given credit for hard work. Here are some components worth considering:
- Authentic: Managers don’t want to give the impression that recognition is just a necessary evil. It should come from a genuine place. Authenticity ensures that employees feel truly valued and appreciated, rather than perceiving such efforts as superficial or obligatory.
- Personalized: People want to receive feedback differently. Some prefer praise in one-on-one conversations, and others don’t mind a shout-out in the group chat.
- Fair: There's no need to play favorites. Everyone is in the same boat.
- Sense of alignment: Recognition should be naturally integrated in the daily workday and fit into the organization’s culture.
Make it official!
Recognition platforms are an excellent tool for encouraging employees to appreciate one another and acknowledge great work. These platforms enable colleagues to share public or private messages celebrating achievements and contributions. Many also include a points system, allowing employees to earn points for recognition, which can later be redeemed for rewards or gifts, adding an extra layer of motivation and appreciation.
Never miss the chance to celebrate
Celebrating work anniversaries, achievements, and birthdays with thoughtful gifts and perks is a simple yet effective way to recognize and reward hard-working employees. Small gestures like a morning off, or a gift card, can make a meaningful impact. Practical company-branded items, such as cozy t-shirts or fun mugs, not only show appreciation but also demonstrate the company’s commitment to its employees.
Prioritize well-being and creativity
Work-life balance is crucial for both personal well-being and professional success. When employees are able to balance the demands of their job with their personal lives, they are more likely to experience lower stress, increased job satisfaction, and improved overall health. A healthy balance helps prevent burnout, allowing employees to recharge and maintain a high level of productivity over time.
With Flowscape’s mobile and desktop app, desk bookings make it easier to achieve work-life balance for hybrid workers that work from anywhere. Your employees can seamlessly switch between different office spaces and the home office, by simply reserving a desk in advance. It’s quite a convenience when you wish to book a meeting room for brainstorming sessions with the rest of the team or get your creative juices flowing in a comfortable lounge area.
What to avoid when dealing with incentives
Be clear about what goals need to be achieved to receive rewards. If the goals aren’t well-defined or based on measurable results, employees might think the program is unfair or biased toward certain people or teams.
Also, watch out for situations where employees find ways to rig the system in ways that could hurt the company. For example, if a sales team gives out too many discounts just to hit sales targets and earn rewards, it might look good on paper but hurt the company's overall performance.
Make sure your incentive program fosters teamwork. Rewarding individuals too much can create bad vibes, like withholding help or even sabotaging others, as people focus more on competing than collaborating.
Last but not least, rewards should be based on what employees can control, not luck or popularity. If employees feel like their success is more about chance than effort, they might get discouraged and less motivated.
How do we know if an incentive program is successful?
The best way to measure the success of an incentive program is to define specific ROI:s (return of investments). Return on Investment (ROI) is a key metric for measuring the profitability or efficiency of an investment. It is calculated by dividing the net profit by the initial investment cost. Commonly used in areas like marketing, sales, and capital projects, ROI helps businesses assess financial returns and determine the effectiveness of their investments.
When calculating the ROI of an incentive program, decide what the goal of the incentive is. Is it to increase employee satisfaction, have less turnover, or strengthen the employer brand?
Key metrics to explore
Employee retention rates
Analyze turnover rates before and after introducing the incentive program. A decrease indicates improved retention and will most likely lead to lower recruitment expenses.
Employee engagement
Use surveys to measure engagement levels. Higher scores often signify better morale and increased productivity.
Productivity metrics
Evaluate project completion times, or other productivity indicators, to assess the program’s impact on performance.
Cost savings
Calculate savings from reduced turnover, recruitment, and training expenses. Compare these savings to the program’s cost to evaluate its efficiency.
Revenue
Assess if the incentive program correlates with revenue increases by tracking sales or other revenue-related metrics.
Engagement levels
Track participation rates in the program to determine its reach and effectiveness.
Popular recognition types
Identify the most appreciated incentive types to optimize the program’s impact.
Identify industry benchmarks
Compare your metrics with industry benchmarks to assess performance and identify areas for improvement.
Invest in your employees and reap the benefits
It’s safe to say that investing in meaningful employee incentives isn't just about offering rewards; it's about creating a positive, engaging environment that motivates employees to perform at their best. Ultimately, the true ROI of employee incentives goes beyond numbers. It’s about building a workforce that is able to thrive and contributes to long-term organizational growth.