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Can Non-Financial Incentives Work? You're In Trouble If They Don't

Sep 1, 2007
The Oxford English Dictionary defines an incentive as "Something that arouses feeling or incites to action". If the only thing that will do this for your employees is money then you have problems. Of course people want financial returns for their work - they have to live and, yes, financial incentives work in many situations, but let's look at some of the other reasons people may come to work.

It is worth considering volunteer organizations when we want to look at peoples' motivations. They don't get paid yet many volunteers devote much time and hard work to their favourite causes. Often they risk their lives in fire and rescue type organizations.

Some of the jobs they do are often boring, and have low skill requirements yet they turn up week after week to work on the stalls, repair equipment, clean the premises or answer the phones. These people have found a cause they are interested in, can be passionate about and feel is worthwhile.

Why can't we manage the same level of engagement at the business workplace?

Well, quite often we can. There are many good employers who, while they may not pay the highest wages or provide financial incentives, do manage to generate loyalty and passion in their employees.

Back in 1966 Frederick Herzberg conducted some research which has turned out to be very useful for managers. He was interested in the importance of work and working conditions to working people. His study covered 300 accountants and engineers and collected extensive information on what experiences made them feel good about their jobs and what made them feel bad.

Fourteen factors were uncovered which influenced job satisfaction. What was surprising about the analysis was that the factors which led to satisfaction were different from those which led to dissatisfaction.

This led him to believe that the opposite of job satisfaction was not dissatisfaction but rather just no satisfaction.

While inadequate financial rewards definitely caused dissatisfaction, increasing it did not necessarily lead to satisfaction.

The factors that provided the satisfaction were identified as: a sense of achievement; recognition; being given responsibility; advancement and promotion; awareness of prospects for further growth; interesting work.

If we are going to look at incentives, financial or non financial, the best starting point is defining an objective - what are we trying to achieve?

If what we are trying to achieve is retention of staff and productivity, or having them focus on a particular area of the business, and we feel for whatever reason that financial incentives are not the answer, then we should review a few factors.

Has the organization defined where it is going and what it stands for? If people can relate to what the business is aiming to achieve they stand much more chance of being able to relate their individual work to it and consequently finding it more interesting. Managers can help them make this link.

Do people really understand what we want them to do in terms of what is to be done and how they do it. Are there clear job descriptions which focus on what is they need to achieve. Are the organization's core values described in terms of how successful people behave? If these are in place then there is more chance of someone knowing what they are aiming for and reaching that sense of achievement.

Is there a process in place to provide feedback to people on their performance - a process that systematically measures what people do and how they do it so that when they receive recognition they know it was for something worthwhile.

The frequent pats on the back and "well done" are very powerful tools and the additional, more formal recognition, will add a significant boost to them.

Are there plans in place to help people develop and grow? Starting with a Succession Plan for the organization this should lead to evaluating the aspirations, performance and potential of individuals and putting a plan together that meets these along with the needs of the business.

These plans can map out training, job expansion, promotions - whatever the business needs and aligns with the abilities and interests of the employee.

Having processes in place for all these factors will cover the key issues identified by Herzberg and provide the satisfaction that should lead to improved performance.

If you wanted to add further recognition, which are commonly referred to as non financial incentives such as awards, flexible hours, movie tickets and dinners, then these will certainly help, but on their own, they are not often a sustainable way of providing motivation.

So, in addition to the money, people generally want these other factors in their job and their workplace.
If you don't provide them they may well find them somewhere else. This can have major consequences for your business and may well be part of a gradual absenteeism or staff turnover problem that you already have.
About the Author
Paul Phillips is a Director of Horizon Management Group; a specialist human resource management consulting firm. He has over 30 years experience in HR and, while based in Australia, has worked in a number of overseas locations. www.horizonmg.com
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