Why do your employees come to work everyday? What makes them strive for excellence? What makes them shuffle through the day barely putting forth any effort at all? What makes them desire to steal and commit fraud, whether they do or not?
Understanding the answers to these questions is an important part of running an efficient, effective, and friendly organization. After you understand what motivates you employees (as individuals and at the group level), then you can examine the incentives in your organization to see if they are achieving desired outcomes.
For example, Wall Street executives had huge bonuses tied to good performance but little to no risk of loss (aside from firing) for poor performance. Unlimited upside potential with limited downside for the manager (no risk of loss as firing only puts you to zero, not negative), encourages more risky behavior than what is good for the firm.
Similarly, you may want to put incentives and systems in place that encourage your employees to think and act more like they would if they were owners or at least had some skin in the game. Also designing the system to limit the amount of “negative incentive” is important as well.
As much as you want your organization to be an engaging place to work, it shouldn’t be so great that you retain people you wish would leave or get applications from a lot of people you don’t want to hire. Your organization should be a great place for the achievers in your business to grow and develop, not a place for underachievers to “hang out”.
Maintaining your organization in a relatively “flat” fashion where everyone has at least some access to top management and is encouraged to offer suggestions for improvement will make you more appealing to achievers. When some of these suggestions are acted upon, give credit where it is due and remind everyone of the importance of their ideas. A flatter organization also has less places to hang out as middle management can often become such a place where you are not on the bottom of the pile, but you have no real decision making authority either.
At the end of the day, building incentives isn’t something to just delegate to touchy feely HR hoping they will come up with ideas to satisfy the employees, but an opportunity to build and add value with the most important andvaluable part of your organization – your people.