Companies can see rapid jumps in output, directly as a result of the performance-linked incentives, especially effective and well-thought out plans. At the same time, in a mad rush for performance, the very idea of incentives may get missed out – that of motivating your employees.

What does communicating an incentive scheme entail? "Communication is an art of putting the matter in the correct perspective to the target group. All kinds of professional communication in an organisation should be straightforward without any complexities or margins for misunderstandings. Moreover, communicating incentive schemes should be a transparent process and should be precise in nature as improper communication in such sensitive topics will lead to ambiguity. As a manager, one should always foresee the consequences of the particular incentive scheme to be communicated to the employee. If the employee is of the mind who prefers non-monetary schemes compared to monetary ones than communicating a monetary incentive scheme to him/her becomes a challenge. An effective method is to obtain immediate and honest feedback from the employee if he/she is not satisfied by the incentives schemes," says Debasis Chatterji CEO of Netxcell.

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It is important to feel the pulse of your organisation and employees to be able to incentivise anything. And this comes from more than just gut feeling, says Ramanath Gurjala, VP, HR, Lapp India Pvt. Ltd. "It is important to understand the aspirations of your people in a scientific manner. One can use extracts from a structured exit interview (not carried out by the functional head but by either the HR head or another neutral person), an 'Employee Perception Survey' that has been executed by an agency or an institution or the minutes of meeting of staff meetings/open house meetings of top management with employees. Herzberg's Motivation Theory reflects not only motivating factors, but also maintenance factors. One of the maintenance factors could also be an incentive scheme for recognising significant contributions or achievement of targets", he explains.

While theories are a good referral tool for understanding how motivation works, in the real world, simple things like how incentives are disclosed and discussed make a huge difference. For instance, if different incentives schemes apply to different jobs and people, should they be discussed in a common meeting or individually with teams? "It is a thumb rule to discuss different incentive schemes differently to the respective target group. Otherwise, there will be confusion amongst the employees. It is also important to understand the psyche of the employees. Even in a team, there will be different reactions. Generally, the companies follow a policy of discussing these on a one-on-one basis with the employees during their appraisals. Such discussions also provide an opportunity for a feedback session. However, if such meetings are not possible due to the excessive number of employees, then there can be combined meetings with groups of employees who are entitled to similar incentives or schemes in one single meeting," says Chatterji.

People vs Financials?

Lastly, how can employee reactions be used to improve an incentive scheme while sticking to company's financial policies? What is the trade-off?"Linking employee reactions to company's financial policies is a sensitive issue because in most cases, employees would not really look at the financial policy of the company or their impact. Often, many financial policies would be directly linked to the strategies derived and put in place by the board of directors from either financial institutions or the government regulations. Employees would not appreciate those policy guidelines and its linkage to the business. Thus, for example, some of the non-taxable rewards are criticised at many corners either for its ceiling or the mode of restrictive application. Trade-off in such situations is to accept the additional financial burden (that may be marginal) to the company which will help in achieving the real intent of the scheme. Thus, if instituting an incentive scheme for employee referrals, it is better to add on the taxable burden on the employee to the incentive and thus ensure the quantum of incentive. While working out for an incentive scheme that would result in long term results, it is advisable to link the time-bound results as a trade-off. Otherwise, the intended results may not come within the desired periods (which may depreciate over time). In such case, trade-off will be time bound execution or implementation," concludes Gurjala.

- Unnati Narang