As companies increasingly focus upon incentive schemes to attract and retain employees, one question underlines its business value – do benefits really work? Despite claims that rewards can secure and motivate key staff, poor implementation and research could mean these packages are ultimately an expensive way of wasting everyone’s time. Sarah Fletcher reports.

HR risks making itself redundant by failing to provide incentives that employees actually want, offering them too much choice and rewards that, as LSC Learning Advisor Sue Caffary puts it, “don’t benefit many and can be removed at management whim”. Given such apparently critical flaws, can the benefits strategy possibly redeem itself?

Getting it wrong?

The prevailing market trend is increasingly to offer a wide range of incentives, from employee share schemes to extra holiday and company cars. This may seem to profit both staff and organisation by offering a variety of the popular “pick and mix” selection – in theory a useful way of letting the workforce choose those benefits they see as most attractive – yet if certain provisions are consistently more popular than others, offering such a range seems pointless.

Company cars are still a key incentive – Neil McCawley, Pay and Benefits Manager of One Stop Stores Ltd, points out that “it’s the one area where people who do not qualify for a car regularly ask how they could become eligible.” If employees are consistently selecting the same benefits of company cars and extra holidays, such a diverse package appears an unnecessary drain upon administration and resources. In trying to cater for all tastes, perhaps the company doesn’t actually know what its staff want.

Do you know what your staff really want?

According to consultant Don Rhodes, a company can inflict huge damage upon itself by neglecting to communicate with employees about the corporate benefits package. He offers a chilling warning: don’t assume you know what your staff want as you could be moments away from inciting a riot.

“I have just witnessed a situation where company vehicles that were available only to travel to and from work were taken away and replaced by what was seen to be a very substantial one-off cash payment… all hell broke loose. It soon became apparent that the status quo in place not only saved much money but kept the troops happy. Reason – nobody bothered to talk to those most affected.”

Can a company achieve a model reward strategy by simply asking employees what benefits would best motivate and retain them? An obvious complication is that this relies upon staff knowing which benefits would satisfy them in the long term; a cash bonus will produce a surge in productivity but this is unlikely to last for long.

Which benefits produce the greatest return on investment?

Given that the selection made by staff may not produce the greatest possible return on investment to the company, it is the responsibility of the benefits strategist to decide this for the business. Rhodes suggests this is best determined retroactively by analysing productivity rates and levels of staff morale:

“Sales and production schemes can have very measurable results … other examples of good results come from talking to staff and then observing behaviours like better team working and increased enthusiasm to go beyond what is required.”

It is surely difficult to accurately measure levels of enthusiasm and general geniality; even measuring changes to absenteeism, staff retention and productivity do not analyse the impact of individual benefits unless each is isolated in turn and the results recorded – not a particularly efficient strategy.

A morale crusher?

Alongside an assessment of the business benefits, the strategist should not neglect to consider the negative impact the rewards package can have upon the organisation. Hierarchical benefits schemes, in which senior employees are provided with a more attractive incentive package than that offered to staff working at lower levels, are commonplace – company cars and private medical insurance are frequently available only to those high up the management scale.

Whilst this can obviously prove extremely useful in attracting and securing highly desirable skills, the company is risking a detrimental effect upon lower levels of the workforce as these staff could feel undervalued and unmotivated by feeling deprived.

Of course, it could be argued that by offering company cars only to senior management, this inspires those further down the ladder to seek promotion in order to secure top benefits. Elaine Bergin, Compensation and Benefits Manager at Clarks Shoes, states that the status associated with certain perks acts as a powerful motivational tool: “Company cars as a status benefit really drive people to progress”.

It could, however, have the opposite effect; making these employees feel the rewards offered to them are of a lower value than those given to others and thus of little worth compared to what they could have. Is HR inadvertently damaging many employees’ enthusiasm by showing that the incentives offered are ok but not great?

What can HR do?

Researching and implementing an employee benefits strategy is a complex process; and as this article lays out, fraught with potential pitfalls. Ultimately, the combined experience of many organisations shows that an incentives scheme must be particular to the individual company – there is no blanket solution that will work for everyone. By communicating with staff and regularly assessing the effects of the rewards package upon key performance indicators, HR should be able to turn it to their advantage and generate real business benefits for the company.

What do you think about the issues raised in this article? Join the debate on Employee Benefits Zone