Article: Performance incentives or a retention strategy?

#BestPractices

Performance incentives or a retention strategy?

An organization might be offering lucrative incentives, not for the sake of performance but for retention of employees
Performance incentives or a retention strategy?

A mobile advertising firm plans to step up its recruitment activity and reward top performers with incentives such as Harley Davidson motorcycles, De Beers jewellery and Volkswagen cars as it races to achieve its target of $1 billion in revenue by 2016. The incentive programme has been designed in such a way that company officials said it would “attract the right kind of talent and thank them in advance for being a part of the ambitious and difficult target the company has set for itself”. However, like all good things, this too came with a catch. Employees who opt for the incentives have to stay with the company for at least three years. If they leave before the three-year period is up, then they will not be eligible for the incentives. Is it right on the part of the company to put a moratorium on an employee’s shelf life, especially if the company believes that it is hiring the right people? Secondly, isn’t there a danger that employees will leave the company after three years once they get the incentives? In that case, hasn’t the whole purpose of the incentive scheme lost?

If you go through this case carefully, this is not really an incentive scheme but a retention program. An incentive program is typically associated with certain performance goals wherein incentive serves as a motivator to begin with and becomes a reward post performance. In this case since it is clearly a retention bonus, we must look at it from that context.

In order to retain employees amongst many, there may be two kinds of strategies. The first one is to bond the employees wherein the employee is expected to pay certain amount if he / she quits earlier. In this case there is no such bond and it is not compulsory to serve the tenure. If I understand this program correctly, in this case the new employee is motivated to stay with the company for at least three years and as a retention tool he/she is given the Harley Davidson motorcycle, De Beers jewellery or Volkswagen car. The employee has a choice not to take this and exercise his/her freedom. There is no “bonding” in this case. Indeed, this is an innovative retention strategy and I am not unduly concerned with it.

With or without the incentives / bonds, employees are always free to exercise their rights to quit. In addition to retention tools like Harley Davidson motorcycles, De Beers jewellery or Volkswagen car, if the corporation has effective engagement programs, fair people practices and skills and capabilities upgradation initiatives etc. the likelihood of attrition after the three years will be minimal.

Topics: #BestPractices, Performance Management

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