Rewarding Employees without Blowing the Budget


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Your company has assembled an excellent group of employees. They work hard and produce excellent results. You’d like to recognize their efforts, but money is tight. During the height of the recession, employers could count on workers staying put just for the sake of their paychecks. However, with the ongoing recovery, money is no longer a sufficient incentive, according to Richard Trimber, a lead attorney for the business law and advisory practice of General Counsel, P.C., located in McLean, Virginia.

“The person motivated by money will be gone with the next bigger offer,” Trimber said.

Instead, Trimber recommended morale-boosting strategies to build a sense of cohesion and teamwork among employees.

“Make people feel like they’re a part of something bigger than themselves,” he said.

Recognition and Incentives

According to Trimber, awarding bonuses in what he called a “lockstep” fashion, without tying them to performance can serve as a disincentive. Employees come to expect bonuses as a regular part of their compensation, and if those bonuses are taken away, workers often view that as a cut in pay.

By contrast, the best forms of nonmonetary recognition combine recognition with incentive. One example: a rotating assignment of plum parking spaces, based on performance during a specified window of time. Another example: expense-paid outings to sporting events or resorts, Trimber suggested.

Ideally, the specified reward should be far enough in the future for employees to be able to plan, yet close enough to be achievable. Employees should also receive regular updates on whether or not they are on pace to qualify for a specific incentive. In that way, employees view such perks as a goal to aspire to, Trimber said.

Other low-cost incentives for recognition listed by Forbes magazine include throwing an in-house party in an employee’s honor, rewarding them with books or flowers, arranging for in-home services such as cleaning or grocery deliveries or including a write-up about the employee in a company-wide email or newsletter message.

Taking a Page from The One Minute Manager

Trimber suggested combining nonmonetary rewards with a strategy borrowed from the best-selling book The One Minute Manager, which advocates managers to “catch them (employees) doing something right.” For instance, presenting gift cards for nearby eating establishments shortly before lunchtime is an especially savvy instant reward. Employees enjoy a free lunch, and the gesture makes a good impression on their associates outside their workplaces, according to Trimber.

“They get these cards and they take their friends out (for lunch),” Trimber said.

Transparency and Worker Incentives

According to Trimber, along with providing adequate compensation, managers should provide employees with a sense of ownership in the company’s fortunes. Along those lines, when companies are faced with circumstances that require belt-tightening, transparency is essential. Managers and owners should present workers with profit and loss overviews, and explain which divisions are performing well and which divisions could use improvement. Underperforming divisions or departments should be provided with an opportunity to improve performance or reduce costs, according to Trimber.

“You have to show them (employees) that the company isn’t pocketing millions but (instead) investing revenues,” he said.

However, Trimber also warned that extended periods of reduced profits or losses are often warning signs of serious problems. Such circumstances often call for more drastic measures than finding innovative ways to recognize excellent employee performance. Trimber recommended that companies aim for a pretax profit of 10 to 15 percent so that they can ride out slow periods without making drastic cutbacks.

“If they’re (companies) not producing enough for a 10 to 15 percent pretax profit, you need to rightsize the company,” he insisted.

Promoting a Productive Work Environment

According to Trimber, recognition of outstanding performance is one of three duties that managers owe their workers. In addition, managers should provide workers with clear performance expectations and adequate tools to do their jobs. Cultivating this type of collaborative environment represents a powerful means of keeping good workers.

“It starts with leadership setting the right tone and creating the right culture. And then disciplined operation of the business to function effectively. Experienced, skilled trade/craftsman can always find work – they chose where to work based on non-financial items and retaining them is key to growing the workforce,” he said.

Audrey Henderson
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Posted In: Management, Money

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