Incentives for professional employees

Professional employees are those whose work involves the application of learned knowledge to the solution of the employer’s problems. The include lawyers, doctors, economists, and engineers.

Making incentive pay decisions for professional employees can be challenging. For one thing, firms usually pay professionals well anyway. For another, they’re already driven by the desire to produce high-caliber work and receive recognition from colleagues. In some cases, offering financial rewards to people like these may actually diminish their intrinsic motivation not add to it.

However, that’s not to say that professionals don’t want financial incentives, particularly those in high-demand jobs like software and systems developers for information technology (IT) firms. A survey of 300 IT departments found that 77% were paying bonuses and incentives, including stock options and profit sharing to IT professionals. Many are also offering benefits that are highly attractive to professionals, including better vacations, more flexible work hours, equipment for home offices, and improved pension plans. Texas Instruments began offering stock option grants to about a third of its engineers when it discovered it was losing about 15% of them to the competition. Several firms, including IBM and Motorola, award bonuses to employees whose work wins patents for the firms.

Recognition-Based Awards:

Studies show that recognition has a positive impact on performance, either alone or in conjunction with financial rewards. For example, in one study, combining financial rewards with non-financial ones like recognition produced a 30% performance improvement in service firms, almost twice the effect of using each reward alone. The Minnesota Department of natural Resources conducted one study of recognition. Respondents said they “highly valued” day-to-day recognition from supervisors, peers, and team members. More than two-thirds said it was important to believe that others appreciated their work.

Employers are therefore increasingly using performance-based recognition programs today. According to one survey, 78% of CEOs and 58% of HR Vice Presidents said their firms were using performance recognition programs. Dallas-based Texas Instruments, for instance offers bonuses as well as non-financial recognition including personalized plaques, parties, movie tickets, golf lessons and team shirts and jackets. The number of individual Texas Instruments employees recognized in this way jumped by 400% in one recent year, from 21,970 to 84,260. At Metro Motors, California the name of the employee of the month goes up on the electronic billboard over the dealership. Managers at American Skandia, which provides insurance and financial planning products and services, regularly evaluate their customer service reps based in specific standards. Those who exceed those standards receive a plaque, a $500 check their photo and story on the form’s internal Web sites, and a dinner for them and their teams.

Online Award Programs:

If there’s a downside to recognition programs, it’s that they’re expensive to administer. For examples, many firms run anniversary awards programs to recognize employees on significant dates like their fifth year with the company. The HR department usually has to choose the merchandise, create the rewards catalog, print and mail the catalog, and monitor everyone’s anniversary date and make sure the employees actually gets his or her award. This can be very time-consuming.

Many firms including Nortel Networks, Nextel Communication, Levi Strauss & Co., Barnes & Noble, Citibank, and Wal-mart now partner with online incentive firms to improve and expedite the whole process. Management consultant Hewitt Associates uses to help its managers more easily recognize exceptional employee service with special awards. After just eight days, the number of award request online exceeded those from both its offline programs, in part because the Whole system makes recognizing employees and letting them choose the awards so much easier: the gifts are good and easy to order from the desktop and we value the ability to update gift choices easily so the program doesn’t stagnant, says Hewitt’s program’s administrator.–

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