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Improved Measurement on Incentive Investment Crucial in Challenging Economic Times

The tougher economic outlook means increased scrutiny on the returns on investment in employee reward and recognition programmes can be expected, according to Solterbeck, Australia’s leading performance improvement company.

“Spending money on incentives to boost performance is good business sense,” Solterbeck executive chairman Sue Jackson said. “But with the economy beginning to slow in most states there will understandably be more focus on measuring what is being delivered to the bottom line.”

According to Solterbeck, US research* shows incentive programmes can increase individual performance by 22 per cent and team performance by 44 per cent and it expects results would be similar for Australia.

“Those numbers are in line with feedback from individual clients here,” Ms Jackson said.  “They indicate there are tangible returns from structured performance improvement programmes that incorporate a clear measurement function and business needs to keep this in mind as it faces a new financial year.”  

Ms Jackson said despite a more challenging business outlook, the labour market would remain relatively tight. Management would therefore face a dilemma between controlling costs and investing in programmes to motivate and reward staff.

“A slower economy and range of cost pressures mean businesses are looking at belt-tightening while needing to maintain and grow sales and avoid the costs associated with staff turnover and low morale,” she said. “From this perspective, it’s more critical than ever to look at the returns on what is being invested and focus on the overall business objectives.”

She said incentives are clearly easiest to budget for and measure when focused on sales productivity.  These programmes also tend to be most unaffected by economic shifts, as they pay for themselves out of the profits or cost savings they generate. 

“Clearly non-sales based objectives, such as improved teamwork, staff retention and cultural change, can appear to be harder to measure,” Ms Jackson said. “But companies that make a dedicated investment in recognition and reward in these areas know that there are clear measurement criteria.

“These include growth in average employee tenure, substantial savings on turnover costs, improved employee motivation and morale, and improved customer or client satisfaction levels. A well planned recognition programme puts meaningful numbers against these which allows the incentive investment to be fully evaluated.”