The Best Way to Incentivize Employees

It’s challenging for organizations to get employees to complete tasks and accomplish goals up to set standards. Either there’s a miscommunication or employees don’t feel like the task is worthwhile or important. Businesses have the responsibility of creating solid systems in order to hold their people accountable.

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Incentives are a great way to encourage employees to exceed expectations, but incentives have to be used in the right way. Most organizations have annual reviews that tie performance to budgets or goals, and provide a standardized incentive; however that’s not always the best way.

I’m currently reading Good Profit by Charles Koch, who says that incentives should be tied to value instead of the more traditional route. Koch’s companies even go as far to suggest, “when individual employees create more value than their leaders, they are compensated more than their leaders, no matter their title” (195).

This then encourages every employee to perform beyond the set standard and their potential.  The company also positions its employees to take risks that are inline with the companies values and reward employees as long as due diligence is applied even if the project fails. Koch does not put limits on compensation and bases monetary incentives strictly on value creation.  They encourage employees to work as if they were entrepenuers in order for the employees to be committed to the organization.

In order for incentives to work, leaders have to use them to encourage behaviors that are tied to the values and goals of the organizations. Leaders must provide honest feedback with their employees and show their commitment to success by rewarding those that deserve it and coaching those that don’t.

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Another idea Koch brings up is those employees who are self-actualized. This means that “work becomes part of how [the employees] define themselves. They need to feel they are working for a worthwhile cause” (197). While this is harder (if not impossible) for companies to create, they should try to create a workplace where employees feel important and hire based on personality.

The culture of the company should drive its incentive strategy.  Koch encourages employees to own their performance by incentivizing the value that is created, which is ultimately good for the company as well.  Whatever the company wants to achieve and accomplish is what should be measured and incentivized in order for employees to exceed expectations.

What types of incentives do you have at your company?  Let me know in the comment section below.


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