The issue of staff retention has never been hotter. So how can companies ensure their employees stay motivated – and stay put? Verity Gough reports.

Encouraging employees to go that extra mile is no mean feat. Increasingly, companies are turning to incentive schemes in a bid to make staff feel valued and appreciated but does the odd gift voucher really make that much difference?

Although the concept of employee incentives is not a new one – sales and marketing departments have been rewarding staff for hitting their targets for decades – an increasing number of businesses are starting to implement company-wide reward schemes that cater for every employee, regardless of their department.

And while many firms may dismiss the idea of a structured scheme, evidence suggests that it could well be instrumental in helping boost company morale and even prevent employees from leaving. In fact, the Chartered Institute of Personnel and Development’s (CIPD) most recent employee engagement survey found that around a quarter of employees are rarely or never made to feel their work counts.

Sheila Sheldon, director of European operations at Michael C Fina, a global employee reward and recognition provider, believes that many businesses are failing their staff by neglecting the simple art of appreciation.

“We all go to work for one reason – to get paid – but while we are there, if we feel wanted, valued and appreciated, then it creates a far better environment,” she remarks. “You may be a quiet little wallflower merrily going along doing what was asked of you, but that doesn’t mean you aren’t doing your job; it’s just that you haven’t been noticed. This is one way of ensuring that everyone is treated as equals.”

Reward and recognition

Broadly speaking, employee incentives fall into one of two categories: recognition and reward. While rewards are given for achieving pertained goals set by managers, recognition is about acknowledging when someone has gone that extra mile.

The ad hoc approach of dipping into the office ‘gift drawer’ to fish out a bottle of wine or voucher appears to be falling short in today’s competitive climate. “The reality is that people are the raw material of businesses just as steel and iron were in the past,” says John Sylvester, managing director of integrated marketing communications company, P&MM. “Making staff feel valued is fundamental and as simple as it is; a thank you really does go a long way.”

For a recognition scheme to work, it needs to be framed around a strong set of business objectives, such as reducing employee turnover and absenteeism, then it will become ingrained into the company culture.

“When the programme is structured, organised, branded and made to become something which is much more part of the daily fabric, it can make a phenomenal difference,” says Derek Irvine, global employee engagement leader for Globoforce, a provider of strategic employee recognition solutions.

Irvine believes a structure for rewards will also help staff maintain the firm’s core values. “One of the key questions that needs to be asked is: What do you want people to do differently? If this isn’t done, you end up creating a scheme that lacks any definition or clarity.”

Another important consideration is the manner in which the recognition is given. “The function of the recognition programme is to create heroes out of employees, and it gives an illustration of what ‘good’ looks like at the same time,” says Sylvester. “By publicly acknowledging the employee in front of colleagues, it is a great morale booster.”

Cash versus non-cash rewards

One of the most widely debated issues regarding staff incentives is the cash versus non-cash argument. While a cash reward is convenient, it lacks memorability – a key component of a successful incentive programme.

According to Sheldon, the best-managed companies use non-cash awards and incentives to keep employees engaged. “Staff can earn rewards for a variety of things: from improving productivity to coming up with a good money-saving idea,” she says.

Yet despite evidence to the contrary, many businesses are still failing to grasp this. The CIPD reward management survey 2008 found that while, overall, 70% of employers operate a cash-based bonus or incentive scheme, just 35% have a recognition or non-cash incentive scheme. “This low percentage is odd given that the CIPD’s research on employee engagement finds that many workers don’t feel recognised by their manager or organisation,” says Charles Cotton, CIPD reward adviser.

But once cash incentives are awarded, it is very difficult to return to non-cash gifts. This issue has spawned a number of cash alternative schemes, such as the loyalty card. Employees can use credit cards with ‘good deeds’, which can then be spent on luxuries from selected shops; or firms can even create their own credit card, branded with the company logo.

That said, recognition awards don’t have to cost much. Very simple ideas are often the most effective, and the cheapest. “We give the monthly winner a reserved parking space in front of the office for their sole use,” says Sylvester. “Not even the directors have one, so it becomes something that marks them apart. It has kudos.”

But such schemes require hard work on the part of management to ensure consistency and to justify the expense. Internal incentive programmes are often the first to go when the pressure is on, but it is a false economy because it is when people are most under pressure that they feel most undervalued.

“Getting management buy in is essential,” says Sheldon. “It not only keeps the programme running but it keeps everyone firing on all cylinders, so a buzz is created. This really helps cement the idea into the culture so people expect to be rewarded if they go that extra mile.”

Irvine adds that ensuring that departments aren’t segregated is also imperative: “Strategic company values are all shared, so everyone should be part of it,” he says.

There is no black art to implementing a reward scheme to incentivise employees, but by paying attention to the extra efforts made by staff, the culture of appreciation that follows will pay dividends.

Five steps to a successful incentive scheme

1. For rewards and recognition to become part of the company culture, consistency is paramount – make sure you factor in the time to acknowledge achievements.

2. Non-cash rewards are more memorable – small gifts like trophies or certificates that acknowledge people’s skills will be remembered long after a £20 note is spent.

3. Don’t relate the findings of a recognition programme to career progression or appraisals – it will remove the fun aspect and negates the whole point of the scheme.

4. Try using a points scheme or loyalty card rather than simple vouchers – this gives people a choice on where and what they spend.

5. Present the recognition publicly as it is important for the other employees to know that staff are receiving recognition.