Your work/business will take your soul, if you let it. Whether you are an employer or an employee, there are a lot of parallels in our work to our personal relationships. We all know that for 
relationships, one of the keys to success is making your partner feel appreciated. The pat on the back, the warm fuzzy feeling, the hug, ……on some days that is the only thing that keeps us going. And so it is in a startup business where financial rewards are far off and the light at the end of the tunnel is a distant glimmer.
What is the best way to structure incentives in business? What is important? What works and what does not? The answer of course, is …it depends.
The best incentives should be sincere, in other words not something given grudgingly but given as something that has been earned. They should be specific, that is the person being rewarded needs to understand what it is they did right An incentive doesn’t have to be given immediately but the closer it is given to when it was earned the stronger it will motivate. (An annual Christmas bonus doesn’t get us going too much in January, try quarterly instead) and finally a good incentive needs to be personal. Something that motivates one person may de motivate another. A Thanksgiving turkey to a vegetarian? A trip to a conference to someone who hates to travel? As an employer I always thought that money was the universal incentive and it IS important but sometimes it’s not the best (or the cheapest either)
I separate incentives into two categories, those that make employees feel good about where they work and those designed to get employees to do certain specific things. The “feel good” incentives are general things like buying lunch for the office, having a Christmas party, or giving a baby gift. Those are from the heart. The real incentives though, need to be tied to performance.
For an incentive to work for employees it should be based on something quantifiable, there needs to be transparency in how it is arrived at and there needs to be certainty about it. Incentives should be for behaviors and goals that are tangible and measurable. You don’t make an incentive for something like work attitude, that type of behavior will be rewarded (or not) at the employee’s annual review but you could make an incentive for something like customer compliments or another attribute that might reflect on attitude
A vague promise of “if you do this project well, I’ll reward you” may work once or twice but most of the time incentives like this will eventually fail because the expectations on both sides have no definition. Incentives like this only work when the level of trust is very high and the goals of the employee and the employer are in total alignment.
Something that I think a lot of employers do wrong with incentives is to never change them or examine the validity of the data. How many times have you been somewhere where the employee asks you to check a box on some form that he did a “good job” or we are asked to fill out a survey and hand it to the person who just helped us? This is not collecting performance data, it’s just begging for compliments. Many managers think they don’t have to pay attention to incentive systems once they are set up. Not so. Managers need to realize that any incentive system is there to help them manage but the system needs to be managed as well. Every incentive system gets manipulated after a period of time, that’s why it needs to be constantly monitored and occasionally adjusted. Not only does this attention to incentives help to avoid unintended consequences (like sacrificing quality for productivity) but it also keeps them fresh and engaging for employees. Measuring and capturing the performance data that underlies the incentive systems is often the biggest benefit to management. The keys to improvement are often clearly visible in the data and measurement gives employees security in knowing how they are being evaluated.
For startups, incentives are essential and as the boss sometimes you need to give them to yourself as much as to your employees. During a startup the company becomes all absorbing. It consumes all the energy you are willing and able to put into and you don’t get much back initially. In a social enterprise startup it’s even more important as there are social benefits that are at risk, not just your own livelihood. It makes me think about the warning you get at the beginning of every airline flight: “In the case of a sudden drop in cabin air pressure please give yourself an oxygen mask before helping others” It’s the same thing in a startup. You have to take care of yourself or the whole ship goes down. Startups are hard work, and they should be….but know your limits and be aware of the personal costs of what is being accomplished. Set goals and when you realize them, reward yourself.
Work is something you do in exchange for something else. Even if you love what you do you are still looking for your job/company to support you financially as well to give you professional fulfillment. If you are the boss, don’t forget to give yourself incentives and rewards too……. A weekend on the beach, a day of hooky on the ski slopes, a shopping spree. Don’t think twice.
