How to deliver both good and tough messages on incentives

Pay motivates staff, but it is not the primary motivator, according to the Employee Benefits/Lorica 100 Club research 2014.


If you read nothing else, read this…

  • Pay motivates staff, but it is not the primary motivator.
  • Recognition is more important than pay for many employees.
  • Bonuses should be awarded only for good performance.

More than three-quarters of respondents (76%) to the research survey, published in June, said pay helps to motivate staff, but just 22% think it is the primary motivator. Most respondents (64%) measure the extent to which pay motivates staff, and of these, 69% do so by using external staff surveys managed by a third-party provider.

Daryl Maitland, senior HR business partner at Cafcass and one of five attendees at the Employee Benefits/Lorica 100 Club thinktank debate, held in April, says: “Once staff earn over the minimum amount that takes care of their essentials, money becomes less important. What becomes more important is being recognised and appreciated: the softer stuff. It goes back to basic Maslow’s hierarchy.”

Maslow’s hierarchy of needs is a psychological theory that identifies humanity’s basic needs in order to function.

Ian Hodson, reward and benefits manager at the University of Lincoln, adds: “Maslow stacks up, but anything on top of that comes down to what is the best use of that [theory], whether it’s for staff or organisations that are trying to get their message out there.”

Bonus not just for top performers

Hodson says employers must ensure that whatever approach they take considers the whole organisation and not just high-performers, as he has tried to do with the university’s annual staff bonus scheme.

“Over the last couple of years, we’ve had a reward site and given everyone £50 all the way through the organisational structure, right down to students helping out on open days, so everyone’s got a little something,” he says. “What I’ve learnt from that is that it’s totally the recognition that counts; it has nothing to do with the value.”

Hodson says the university’s bonus scheme is highly effective in boosting employee engagement and commitment to do more.

The plan replaced a recognition scheme that was based on individual performance, which Hodson says was disconnected from the university’s corporate objectives and which cost as much as the bonus scheme, but without achieving the same results.

Avoid rewarding poor performance 

Hodson acknowledges that the bonus scheme risks rewarding poor performance, but says this concern is offset by his belief that poor performers are either carried along by high performers or encouraged to improve their own performance. 

But Neal Blackshire, benefits and compensation manager at McDonald’s Restaurants, says employers should avoid rewarding poor performance wherever possible, irrespective of how difficult that message is to deliver to their workforce.  

He recalls having a difficult time in the early 2000s when McDonald’s underperformed financially, and back-office staff did not receive a bonus for three years running while employees in some of its restaurants did get a bonus because their performance was good.

But Blackshire says staff eventually understood the employer’s rationale. “It was a really tough message to deliver in the first year,” he says. “The response in the second year was ‘oh God, not again’, but by the third year it was ‘oh, okay’. Employers have got to make sure their bonuses are actually rewarding an achievement and that staff understand what level of bonus they should get for their achievements. If an organisation does not perform, staff should not get a bonus.”

Beware an entitlement culture

Ed Airey, UK reward manager at insurer RSA, says this is a tough approach to take for HR and benefits professionals who are working in paternalistic organisations that promote a culture of entitlement for benefits such as bonuses. “We had an interesting time last year, to put it mildly,” he says. “Traditionally, we’ve been very paternalistic as an employer, so when our financial results weren’t that great, we were giving more of a bonus pot than perhaps was the right thing to do, which is a nice thing to do, but not the most commercially sensible thing to do. It’s not the worst thing in the world, though, because an employer can’t keep on having an entitlement culture without a bonus.”

But Blackshire says employers must stick to their guns, however tough the outcome, which may mean losing staff. “Employers have got to stay true to their approach or all they are doing is increasing an employee’s salary and removing the motivational impact of bonuses,” he says.