Businesses often use incentive plans to drive and reward performance and to retain strong performers over the long-term. However, due to limited resources and capital, nonprofits often spend less on their compensation packages compared to for-profit companies.
The power of a company-wide incentive program is undeniable; a recent Gallup study revealed that a lack of recognition is one of the most common reasons why employees leave an organization. Research further suggests that the more talented the employee, the faster they are to leave.
Creating a successful incentive program for a nonprofit organization is essential for modern businesses that want to attract and retain top talent, foster a positive work environment and promote good teamwork and collaboration. Learn how to create an incentive program that will help staff feel appreciated and become more engaged.
Creating an Incentive Program: The Basics
Every organization is different; therefore, its incentive program must reflect the unique mission, goals and objectives. Start by brainstorming ideas of what type of incentive program the nonprofit should implement for its employees.
Some of the most commonly used programs include project milestone bonuses, annual performance bonuses, sales-related commission programs, ad hoc bonuses and profit-sharing opportunities.
Bring in the right people to assist with this project, including management, HR staff and finance professionals.
The management team can help develop business metrics and objectives, while the HR team can be tasked with assessing current marketing conditions and developing compensation ranges.
A finance professional can help develop and test payment alternatives to ensure that the incentive matches the defined goals achieved, and that incentives paid for less than 100 percent achievement are in line with what the nonprofit is willing to pay.
Establishing Key Goals and Objectives
A successful incentive program will have pre-established goals and objectives, ensuring employees understand not only the parameters of the program but also the reward. Goals for incentive programs should be specific, achievable, measurable and results-driven. Consider hosting a meeting where management from all departments can express their ideas and recommend priorities to address during the program.
Next, determine if the incentive program will be short-term or long-term. Some businesses use incentive programs to streamline a specific project or period of time, while others have permanent incentive programs that employees can continue to work towards to earn rewards or bonuses.
Before implementing an incentive program, bring in a data professional to review and ensure that no sales or marketing issues have been overlooked.
Aligning Incentives with Objectives
Incentive programs are often put in place as a way to encourage employees to meet a particular goal or objective. For example, if employees for a nonprofit used an average of ten sick days per year, this could negatively impact productivity. In an attempt to reduce this number to a maximum of seven sick days per year, a nonprofit may use incentives.
It is important to consider which incentives would be meaningful to the workforce, such as a monetary reward for staying under a certain number of sick days. Businesses can make it easier to track sick days and rewards by providing rewards each quarter. For example, any employee that used two or fewer sick days per quarter would be eligible for a reward.
Setting a Budget for the Program
One of the biggest challenges that nonprofit organizations face when creating incentive programs relates to limited cash flow problems. A budget must be structured for a nonprofit incentive program to ensure that appropriate funds are allocated without interfering with normal business operations.
There are several ways that nonprofits can properly budget, and potentially even save money. First, consider sharing the incentive program budget between multiple departments. Incentive program costs and benefits can also be shared between a co-op of non-competing companies. Nonprofits can also choose to use marketing development funds (MDFs) as a collaborative budgeting structure.
Choosing the Incentive Program Audience
Depending on the budget of the organization and the objectives of the incentive program, a business may choose to only offer incentives to a particular department or group of employees or executives. When choosing the audience for an incentive program, it is important to consider who will get the most meaning and value from the program.
Avoid targeting only high-performing employees; typically middle performers often have the biggest impact on the business’s growth in the long-term. Also, keep the average age of the audience in mind; employees of various ages may be motivated by different incentives.
Selecting Incentives for the Workplace
An incentive program can boost employee performance from roughly 25 to 44 percent, according to the International Society for Performance Improvement. Some of the most sought-after incentives by employees include the following:
- Cash Incentives – Money can be one of the biggest incentives for employees. However, it is important to remember that cash bonuses are generally added to an employee’s wages. The IRS defines cash bonuses as “non-discretionary bonuses,” meaning they must be included in a worker’s wages when calculating overtime.
- Non-Cash Incentives – Incentives may also be offered that are not cash, but rather special prizes for a high level of performance. These prizes could include gift cards, gift certificates, company swag or other gifts.
- Awards for Performance – The main goal of incentives is to motivate employees to be more productive. Consider giving out awards for performance, such as outstanding customer service, highest productivity or employee of the month.
Communicating and Fulfilling Incentives
When implementing an incentive program for a nonprofit organization, it is important to maintain clear communication with participating employees. Develop a communication strategy that will help keep participants engaged and updated during the program, such as an online web portal, email or text message.
Also, consider how rewards will be fulfilled. To simplify the process, allow participants to redeem rewards online. Regardless of how they are fulfilled, ensure that they are delivered in a timely manner.
Schedule a Consultation with BBG
Interested in learning more about how to create an incentive program for a nonprofit organization? Reach out to the experienced business benefits consultants at the Business Benefits Group.