List of 10 most powerful Incentives used in Managerial Economics

In this article, we shall look into the importance of incentives in an organisation, how they can impact employee retention and a few examples of how companies of various sizes could utilise economical methods to attract and retain favourable talent.

Incentives are offerings made by an organisation, to show appreciation towards their employee’s work and to further drive motivation. Incentives can hold immense power over how the workforce is motivated to perform. Companies spend a lot of time and effort in designing the incentive programs, over time, and they are regularly revised, based on change in the employee demographics.

Many leading organisations stand as examples to show that it takes more than just the standard “bonuses” to keep employees motivated. Since each employee personality is different, their means to appreciation would differ as well. Material incentives may not work on everyone, though it is among the most popular form of incentivisation. Human Resource departments play a major role in such programs, since they are the ones who have the responsibility of understanding the individual employees and their biggest motivator factors. It becomes crucial that they align the incentive programs to match with the organisation’s goals.

What is the Importance of Incentives?

It is no secret that the biggest asset possessed by any company, is their employees. And companies do everything in their power to make the work-life of their employees, as smooth as possible. The realisation that investment in their human assets, shall lead to long-term returns, is one of the most critical lessons for any organisation.

With that, here are some reasons to why incentives are important, apart from the remuneration for employees:

  • It has a positive impact on the productivity and efficiency of the employees – well-motivated employees tend to focus more on their career trajectory, since their job security is higher, and stress-levels lower
  • Enhancement of team effort – employees feel more as a part of the team when they are incentivised correctly
  • Greater work-life balance – employees are inclined to working longer with companies which show them that their life outside of work is equally as important as their tasks
  • Better retention rate of employees – it is plain human behaviour where we feel comfortable staying in a place where we feel appreciated
  • Employee’s perception of appreciation – differentiating between each employee’s perfection of appreciation is key to a well-knit team and it goes on to show how well the company knows its members

Companies which realise the importance of correctly incentivising their staff, find themselves far ahead of their competition in the race.

Top 10 Examples

  1. Health Benefits – many companies provide the medical insurance and cover the wellness checks for their employees, while only some cover for immediate family too. While this is definitely a choice for the companies to make according to their budgets, it is often noted that employees with family coverage, tend to show lower stress-levels, which in turn affects their efficiency in a positive manner.
  2. Vacations – offering vacations to employees as a reward for successful completion of a milestone could surely help companies improve their retention rates.
  3. Family Week – hosting a family week in a year could prove to be beneficial to the firm, at large, since this involves a personal level of bonding between the employees and their families. This holds equal values for small and medium sized organisations, as it does for their larger counterparts.
  4. Tuition re-imbursements – there are two ways organisations can use this incentive:
    • To attract new talent – re-imbursement of fee spent on education, which is to be utilised for the benefit of the company tasks, are highly valued by new entrants. Purely because student loans cover a large portion of student debts, those who get incentivised by their company, feel more welcome into the team, along with a perception of appreciation from day 1.
    • Retention of existing talent – Re-imbursement incentives can be used to retain key talent, who wish to pursue higher studies. Many leading companies around the world allow their entry and associate level employees to pursue higher studies, with the stipulation that they shall resume their duties with the organisation upon successful completion of studies. This is beneficial to both, the company, and the employee. While it adds credibility to the employee’s skills, these skills are utilised in improving the organisation’s overall performance.
  5. Employee of the month – this program has been prevalent since more than a century and has worked in favour of many teams (and companies, too). In its roots, is embedded, the long-standing human tendency to be recognised with awards. With this being a monthly occurrence, employees are driven to keep performing their best to achieve small goals, which ultimately leads to the completion of the larger goals on the corporate strategy roadmap. Many companies recognise those employees in their annual event, who have achieved “Employee of the Month” on more than one occasion.
  6. Profit-Sharing Scheme – apart from bonuses, if the employees are given a piece of the profit pie, it works wonders, since they now feel more invested into the company, and have a direct relation with the profits of the company.
  7. Fun at the office – With the boom in “start-up” culture, and its incorporation into the corporate world too, stress-relieving options within the confines of an office have become quite popular. From ping-pong tables, video games and lunch schemes, to team building activities such as inter-department sport competitions, the definition of fun has changed.
    All work and no play? Not the case anymore.
  8. Flexibility – Having the flexibility to work from home a few days a month, or on fixed days of the week, not only works in favour of the employees, but also the employer firms. Even the slightest decrease in transportation re-imbursements can go a long way when dealing with a large number of employees, while the employees get a chance to de-clutter on a regular basis.
    Especially with the pandemic showing the world that it is possible to carry out most operations from home, the hybrid working incentive has become quite popular and is a very sought-after perk during the contract-signing phase.
  9. Money incentives – the traditional cash bonuses, are generally the trump card, where incentives are concerned. It is generally not easy to go wrong with money incentives, though it is better to understand the motivating factor of the individual before making the schemes. With the change in time, there have been changes in the desired incentives.
  10. Thank You! – yes, these simple words are an incentive! A personalised note expressing gratitude for the services, can go miles in motivating an employee. Various studies have been conducted by research groups, where the subject was “appreciation and gratitude in work-places”. Many employees mentioned the decline in their will to work longer terms with their current company, purely because they felt a lack in verbal communication of appreciation.
    Sometimes, a hand-written note on the company’s letterhead or a simple email will suffice.
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What do you think are the other effective means to incentivise employees?

As employees, what perks would you like to have on your contracts?

Mention in the comments below.

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