Human Resources News & Insights

When do workplace incentives become disincentives?

Does your incentive program bolster company culture or diminish it?  Guest poster Catherine Spence explores how companies can design incentives that strengthen engagement and reinforce organizational values.  

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“Company culture” is a hot term in human resources circles right now. But what does it actually mean? Is it all just about the perks? Yes, a company’s culture may be partly comprised of material benefits, like free vending machines or foosball tables in the break room, but these aspects don’t capture the whole picture.

In the Merriam-Webster dictionary, the first definition of the word “culture” is “The beliefs, customs, arts, etc., of a particular society, group, place, or time.” That’s really what company culture is all about, too: the collective values that govern a group’s daily practices.

Thus, for many HR executives, company culture is made up of the conceptual values that they feel employees should embody. Often, these are conflated with the ways in which company leaders want customers to experience their brands, leading to a nebulous and vaguely defined cultures.

It can certainly affect external branding efforts, but company culture is actually an internal construct that both influences the office ethos and establishes a clear set of standards for employees to follow as they interact with each other and with customers.

If HR executives can get a real handle on their organizations’ cultures, they can better engage employees and optimize it for the good of the company’s long-term performance. Sounds simple enough, but in one global study, 87 percent of responding organizations reported that culture and engagement issues presented big challenges for them.

Avoiding Impotent Incentives

Just as no societal culture is the same as any other, no company culture is the same, either — a one-size-fits-all approach isn’t going to work.

First, HR executives need to consider what the specific objectives of their particular businesses are and how they can be tactically achieved from within. A company culture that nurtures and supports those strategies can then be cultivated.

What tends to be missing most often is a deep understanding of what it means to enact a company’s values day to day. This is why Netflix’s culture deck, for example, is so unusual; it clearly describes the type of work that its employees tackle and shows how that work can be done in a way that exemplifies the values Netflix is trying to promote.

Incentives can be a good way to help get employees absorbed into the company culture, but they have to be conceived and put forth in context. Perks are all well and good, but to develop an effective incentives program, the most important question is “What’s really important to staff members?”

If it’s any indication, when people are asked what one thing they’d rescue from a burning building, most will say a person, a photo, or something representing a memory — rarely do purely physical items matter most. Often, intangible things are what draw people’s focus and elicit feelings of attachment.

While they can be powerful motivators, incentives that aren’t integrated within the company culture and overall strategy are unlikely to hold much sway. Employees crave continuity and consistency at work, so perks need to not only be appealing, but they also need to make sense — align them with the direction in which the business needs to grow.

Disjointed Equals Disgruntled

Perks don’t always do what they’re expected to — in fact, they can sometimes backfire. The following possible scenarios should be considered before settling on any incentive package:

  • Mixed Messages: The way incentives are set up sometimes contradicts the core cultural values a company is trying to reinforce. For example, there’s little point in drilling employees on the importance of collaboration and teamwork if performance-related bonuses are based only on their individual achievements.
    In this case, it would be far better to implement a rewards scheme that recognizes employees for being on board with and demonstrating core company values. An organization in this situation can solve this tension by incentivizing group performance goals — like customer success — within a sales team or across functional teams.
  • Carrots vs. Carats: Offering tangible perks might initially attract people to a company, but they’re rarely what make employees choose to stay. They can increase employee productivity by creating happier, healthier, less-stressed workers, but when employees become accustomed to receiving free gym memberships or gourmet lunches, they might start looking elsewhere for an upgrade. Especially if a downturn means those types of benefits have peaked.
    To avoid that plateau, incentives should be more integrated with company values. They need to encourage engagement and come with clear justifications, rather than just being presented as “add-ons.” If employees are watering the grass themselves, it won’t seem greener elsewhere.
  • Time for a Change: Strategic shifts are always difficult to execute well, and one of the most common pitfalls is not updating your incentive system. With any type of strategy shift, the question of how expectations will change for employees must be asked. If it isn’t, the current system of incentivizing will continue to function according to the way it was designed, and employees will appear resistant to change.
    In order to avoid this outcome, the change in expectations should be accompanied by a thorough review of incentive systems; a proactive, internal education campaign to communicate any changes; and a commitment by leadership to live by the new incentive system right along with their teams.

Making the bold decision to do away with antiquated incentive systems might seem foolhardy at first, but if the needs and goals of a company have changed, the underlying processes need to change with it. There’s no point in rewarding employees for things (and in ways) that don’t matter anymore.

If HR executives communicate the company culture to staff by leading by example, others will follow. Employees can only drink so much free coffee, but well-deserved recognition for solid achievement is an enduring reward.

CPO Catherine Spence is co-founder of Pomello, a San Francisco-based company that utilizes an HR technology tool to determine company culture to help companies find and retain top talent. Founded at Stanford University, Pomello’s technology is based on 30 years of research on organizational culture.

 

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