3 lessons from industries that do incentives differently


These industries don’t just dish out Christmas bonuses at the end of the year, they put their own spin on it. But would their approaches work in corporate land?

It’s well known that employees are likely to perform to a higher standard when they are rewarded for their efforts. That’s why bonuses, commission and other employee perks exist.

But while most organisations tend to take similar approaches to their incentive programs, there are some industries with very different standards. HRM examines three examples from the sporting, army and entertainment industries and looks into whether they’d work elsewhere.

The sports approach: lock up their benefits

With sport stars raking in million dollar deals each year, it makes sense that their contracts look different to most. They can contain unique clauses that dictate when their signing bonuses are received and types of behaviour that could cause that cash to disappear.

Some researchers are looking into a similar method for employee benefits.

Liam Lenten, a senior lecturer at La Trobe University and Ralph Bayer, a professor of economics at the University of Adelaide, have come up with a novel idea. It’s called “conditional superannuation” and it’s a method that could be applied to Australia’s poorly behaved executives (they specifically reference those in the banking sector).

Their study looks at incentives through a sporting lens. The idea is that, to combat the use of performance enhancing drugs, athletes would have a small percentage of their salary sit in a managed fund, which can only be accessed in the latter days of retirement. The catch is that the receipt of the payment would be conditional on a clean record. So you would have your normal superannuation, and then a similar-sized conditional superannuation.

The research suggests this approach would be more effective in overcoming drug use than the more common method of banning athletes.

Lenten explains in this article for The Conversation: “As with sports stars, bank executives are presented with enormous potential rewards that encourage them to take risks. True, there are sticks as well as these carrots, but they are misfiring.

“What might work better is still more carrots, in the form of conditional superannuation, which can be later withdrawn if the bankers are found to have acted badly. They ought to welcome it. It’s more money, and we know they are keen on bonuses,” he said.

Both top level executives and Australian sports professionals bring home a hefty annual salary. The ABC reported that the average salary of an AFL player in 2017 was $371,000 – with a few lucky players creeping into the millions. Chief executives far surpassed this figure, bringing in a generous $4.75 million on average per year – 78 times more than the average Australian worker.

So applying conditions to incentives, in both the sporting and corporate world, mightn’t be a bad idea, especially when you consider the hot water Australia’s Big Four have found themselves in regarding the distribution of lavish bonuses.

This notion of taking something away rather than giving it at the end is one supported by research from the Kellogg School of management conducted by Kelly Goldsmith and Ravi Dhar. They outline their point of view in simple terms: the feeling of losing a twenty dollar note from your wallets hurts more than the happiness levels you experience when you stumble upon an abandoned twenty on the street.

The army approach: reward each step

The Australian defence force’s approach to pay is a unique one indeed. While most people are given a salary that’s inclusive of all the trimmings: overtime, holiday pay, time in lieu – the army do things a little differently. They receive an annual salary, and on top of that a series of allowances based on their service.

As explained in a VICE article,“In Australia a serviceman is paid for what they do while a civilian is paid for their time”.

The article breaks down some pretty interesting (and very specific) allowance practices, such as a lower pay rate for an officer who’s tucked into bed while another is keeping guard out in the rain. There’s also something called “Parachute Pay”, also known as “Jump Pay”, in which paratroopers who hurl themselves out of planes are compensated for each day they’re expected to take the leap. (I’d only be jumping out of a plane if they coughed up a million dollars per jump, but apparently some folks are happy with the Australian standard of $41.45 per day.)

The breakdown of their allowance rates for specific tasks is extremely comprehensive – covering anything from adventurous training instructor allowances to compensation for the stress and risk that would come with working with explosive devices (there is granular detail on what exactly this constitutes).

Looking at this from a corporate sense, a “reward each step” process could work well, albeit in a much less stringent manner. You could imagine a services company that had an allowance system based on which of its clients you were working with. Overseas clients, which require odd hours and more travel, would attract a higher allowance than local clients.

But you could go further. Just as the army understands there’s unique stress in flying aircraft or deep sea diving, the business world understands that some clients put distinctive pressure on staff (whether that’s through blunt feedback or high expectations). An allowance system would not only incentivise staff to take on that challenge, but demonstrate your company is concerned for their wellbeing. It would also make it easier for you to be flexible with your teams.

Or perhaps you might make sure someone who works in worse conditions is compensated for that; filing papers in the dimly-lit basement versus soaking in the views of your top floor office.

Of course, there are similar reward and recognition processes in place for some workers already, like many sales managers or real estate agents who are entitled to commission for each sale they bring in. While the army’s approach to employee incentives is extreme, there might be a few ideas that organisations could cherrypick for themselves.

The entertainment approach: a sugar hit incentive

While any kind of reward or recognition is likely to have positive results, organisations that aren’t playing a long game, opting for a sugar hit approach, might be inadvertently having a negative effect on their business.

An example of a sugar-hit incentive comes from Michael Schreiber the CEO of FunLab, the company behind Australian entertainment brands Holey Moley, Strike Bowling, Archie Bros Circque Electric, B.Lucky & Sons and Sky Zone.

To celebrate reaching $100 million dollars in revenue, Schreiber plans on gifting one very lucky, and randomly selected, employee a brand new Volkswagen GTI Golf valued at around $45,490.

This is, at best, a PR stunt and one that’s quite easy to poke holes in. Is really a good idea to shower a single employee in cash leaving the rest with absolutely nothing? What kind of culture is promoted by random selection, as opposed to targeted rewards? Surely that money could have been used in a more portion controlled manner, giving more employees a piece of the pie.

Business writer Jennifer Paterson, who specialises in employee benefits, says for Employee Benefits that “for ad-hoc awards to be truly effective, they should be clearly communicated as achievable by all staff”.

“Employers should also take care to ensure one-off awards do not demotivate winning staff if they cannot be sure they will get the same reward again for the same performance. If awards come to be viewed negatively, this could taint their perceived value,” she says.

So if you can’t afford to give away a brand new car every time you hit a financial milestone, then maybe it’s best to ditch the flashy displays of appreciation and just take everyone out for a nice lunch instead.

Image: pixabay.com via Pexels.


Learn about effective strategies to recruit and retain staff with the AHRI short course ‘Attracting and retaining talent’.

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Brad
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The ADF has other allowances which all serving members get such as service allowance (which equates to roughly $15,000) and rental assistance (depending on rank and location between $200-$1000 per week). However without these allowances it would be unattainable for the members to conduct their work. For example, a entry level sailor working at Garden Island on Sydney Harbor has an entry level salary of $50,000. Without service allowance and rental assistance the employee would be unable to even live in the location. These allowances therefore become a necessity rather than a perk. In saying that there is also Seagoing… Read more »

Robert Compton
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Robert Compton

If incentives work well then go for it. I’ve had a mixed response from double movie passes where the supervisor seemed to win most of the time – the winners were their call. A ‘bright ideas’ incentive system where staff passed their bright ideas to their managers. In some cases the employees received rewards but in other cases the manager took the idea and presented it as their own. The worst case was where we set up a team bonus for no LTA over each month. Accident rates plummeted until we realised that peer pressure was preventing injured workers from… Read more »

Isaac
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Isaac

Apparently LEGO embraced sucessfactors a few years ago to appraise employee performance. But it seems they have completely done away with individual appraisals. Its team appraisals in LEGO. That’s the way to go.

Max Underhill
Guest
Max Underhill

There have been business (organisational) driven performance reward schemes around for years. These are at the organisational level and reward for their contribution to the organisation; at the same time they empower the employees. Bonuses and other individual focussed approaches are likely to fail. A properly structured reward system that again rewards for contribution is essential. Ask yourself do we value position and employee for contribution or use some arbitrary value and apply an incremental system, if so the foundation of the reward system is broken and needs fixing before we talk about any performance based system (or empowerment)

More on HRM

3 lessons from industries that do incentives differently


These industries don’t just dish out Christmas bonuses at the end of the year, they put their own spin on it. But would their approaches work in corporate land?

It’s well known that employees are likely to perform to a higher standard when they are rewarded for their efforts. That’s why bonuses, commission and other employee perks exist.

But while most organisations tend to take similar approaches to their incentive programs, there are some industries with very different standards. HRM examines three examples from the sporting, army and entertainment industries and looks into whether they’d work elsewhere.

The sports approach: lock up their benefits

With sport stars raking in million dollar deals each year, it makes sense that their contracts look different to most. They can contain unique clauses that dictate when their signing bonuses are received and types of behaviour that could cause that cash to disappear.

Some researchers are looking into a similar method for employee benefits.

Liam Lenten, a senior lecturer at La Trobe University and Ralph Bayer, a professor of economics at the University of Adelaide, have come up with a novel idea. It’s called “conditional superannuation” and it’s a method that could be applied to Australia’s poorly behaved executives (they specifically reference those in the banking sector).

Their study looks at incentives through a sporting lens. The idea is that, to combat the use of performance enhancing drugs, athletes would have a small percentage of their salary sit in a managed fund, which can only be accessed in the latter days of retirement. The catch is that the receipt of the payment would be conditional on a clean record. So you would have your normal superannuation, and then a similar-sized conditional superannuation.

The research suggests this approach would be more effective in overcoming drug use than the more common method of banning athletes.

Lenten explains in this article for The Conversation: “As with sports stars, bank executives are presented with enormous potential rewards that encourage them to take risks. True, there are sticks as well as these carrots, but they are misfiring.

“What might work better is still more carrots, in the form of conditional superannuation, which can be later withdrawn if the bankers are found to have acted badly. They ought to welcome it. It’s more money, and we know they are keen on bonuses,” he said.

Both top level executives and Australian sports professionals bring home a hefty annual salary. The ABC reported that the average salary of an AFL player in 2017 was $371,000 – with a few lucky players creeping into the millions. Chief executives far surpassed this figure, bringing in a generous $4.75 million on average per year – 78 times more than the average Australian worker.

So applying conditions to incentives, in both the sporting and corporate world, mightn’t be a bad idea, especially when you consider the hot water Australia’s Big Four have found themselves in regarding the distribution of lavish bonuses.

This notion of taking something away rather than giving it at the end is one supported by research from the Kellogg School of management conducted by Kelly Goldsmith and Ravi Dhar. They outline their point of view in simple terms: the feeling of losing a twenty dollar note from your wallets hurts more than the happiness levels you experience when you stumble upon an abandoned twenty on the street.

The army approach: reward each step

The Australian defence force’s approach to pay is a unique one indeed. While most people are given a salary that’s inclusive of all the trimmings: overtime, holiday pay, time in lieu – the army do things a little differently. They receive an annual salary, and on top of that a series of allowances based on their service.

As explained in a VICE article,“In Australia a serviceman is paid for what they do while a civilian is paid for their time”.

The article breaks down some pretty interesting (and very specific) allowance practices, such as a lower pay rate for an officer who’s tucked into bed while another is keeping guard out in the rain. There’s also something called “Parachute Pay”, also known as “Jump Pay”, in which paratroopers who hurl themselves out of planes are compensated for each day they’re expected to take the leap. (I’d only be jumping out of a plane if they coughed up a million dollars per jump, but apparently some folks are happy with the Australian standard of $41.45 per day.)

The breakdown of their allowance rates for specific tasks is extremely comprehensive – covering anything from adventurous training instructor allowances to compensation for the stress and risk that would come with working with explosive devices (there is granular detail on what exactly this constitutes).

Looking at this from a corporate sense, a “reward each step” process could work well, albeit in a much less stringent manner. You could imagine a services company that had an allowance system based on which of its clients you were working with. Overseas clients, which require odd hours and more travel, would attract a higher allowance than local clients.

But you could go further. Just as the army understands there’s unique stress in flying aircraft or deep sea diving, the business world understands that some clients put distinctive pressure on staff (whether that’s through blunt feedback or high expectations). An allowance system would not only incentivise staff to take on that challenge, but demonstrate your company is concerned for their wellbeing. It would also make it easier for you to be flexible with your teams.

Or perhaps you might make sure someone who works in worse conditions is compensated for that; filing papers in the dimly-lit basement versus soaking in the views of your top floor office.

Of course, there are similar reward and recognition processes in place for some workers already, like many sales managers or real estate agents who are entitled to commission for each sale they bring in. While the army’s approach to employee incentives is extreme, there might be a few ideas that organisations could cherrypick for themselves.

The entertainment approach: a sugar hit incentive

While any kind of reward or recognition is likely to have positive results, organisations that aren’t playing a long game, opting for a sugar hit approach, might be inadvertently having a negative effect on their business.

An example of a sugar-hit incentive comes from Michael Schreiber the CEO of FunLab, the company behind Australian entertainment brands Holey Moley, Strike Bowling, Archie Bros Circque Electric, B.Lucky & Sons and Sky Zone.

To celebrate reaching $100 million dollars in revenue, Schreiber plans on gifting one very lucky, and randomly selected, employee a brand new Volkswagen GTI Golf valued at around $45,490.

This is, at best, a PR stunt and one that’s quite easy to poke holes in. Is really a good idea to shower a single employee in cash leaving the rest with absolutely nothing? What kind of culture is promoted by random selection, as opposed to targeted rewards? Surely that money could have been used in a more portion controlled manner, giving more employees a piece of the pie.

Business writer Jennifer Paterson, who specialises in employee benefits, says for Employee Benefits that “for ad-hoc awards to be truly effective, they should be clearly communicated as achievable by all staff”.

“Employers should also take care to ensure one-off awards do not demotivate winning staff if they cannot be sure they will get the same reward again for the same performance. If awards come to be viewed negatively, this could taint their perceived value,” she says.

So if you can’t afford to give away a brand new car every time you hit a financial milestone, then maybe it’s best to ditch the flashy displays of appreciation and just take everyone out for a nice lunch instead.

Image: pixabay.com via Pexels.


Learn about effective strategies to recruit and retain staff with the AHRI short course ‘Attracting and retaining talent’.

4
Leave a reply

avatar
100000
  Subscribe to receive comments  
Notify me of
Brad
Guest
Brad

The ADF has other allowances which all serving members get such as service allowance (which equates to roughly $15,000) and rental assistance (depending on rank and location between $200-$1000 per week). However without these allowances it would be unattainable for the members to conduct their work. For example, a entry level sailor working at Garden Island on Sydney Harbor has an entry level salary of $50,000. Without service allowance and rental assistance the employee would be unable to even live in the location. These allowances therefore become a necessity rather than a perk. In saying that there is also Seagoing… Read more »

Robert Compton
Guest
Robert Compton

If incentives work well then go for it. I’ve had a mixed response from double movie passes where the supervisor seemed to win most of the time – the winners were their call. A ‘bright ideas’ incentive system where staff passed their bright ideas to their managers. In some cases the employees received rewards but in other cases the manager took the idea and presented it as their own. The worst case was where we set up a team bonus for no LTA over each month. Accident rates plummeted until we realised that peer pressure was preventing injured workers from… Read more »

Isaac
Guest
Isaac

Apparently LEGO embraced sucessfactors a few years ago to appraise employee performance. But it seems they have completely done away with individual appraisals. Its team appraisals in LEGO. That’s the way to go.

Max Underhill
Guest
Max Underhill

There have been business (organisational) driven performance reward schemes around for years. These are at the organisational level and reward for their contribution to the organisation; at the same time they empower the employees. Bonuses and other individual focussed approaches are likely to fail. A properly structured reward system that again rewards for contribution is essential. Ask yourself do we value position and employee for contribution or use some arbitrary value and apply an incremental system, if so the foundation of the reward system is broken and needs fixing before we talk about any performance based system (or empowerment)

More on HRM