Training

Does Employee Incentivising Work?

Providing incentives to employees to improve their performance and in turn profiting from it has been a relatively new concept in Indian hotels. Vyas Sivanand finds out if incentivising does work and if so, how?

The continuous influx of western trends due to liberalisation in various fields seems to be stirring up the country from its slumber, with new work ethics coming into place. In the west, especially in the US, employee incentive plans were given so that, 'if they work hard, they can keep their jobs and that is the incentive!' In India, employee incentive plan never existed until recently.

It started in the US at the beginning of the 20th century, when Time and Motion study was introduced to the industries. It was a process of analysis applied to a job or number of jobs to check the efficiency of the work method, equipment used, and the worker. Its findings were used to improve performance. This concept is quite prevalent even today and also in India.

According to B K Shenoy, corporate human resource manager, The Orchid, Mumbai, "In the US, people were not educated in the beginning of the 20th century. To improve their work performance, there were some incentives given to them and in due course of time the system was refined. But the machinery fell into wrong hands with workers devising methods to beat the system. Factories began to make losses, many closed. Incentives were not liked and were discontinued. But in India it was copied much later and in spite of it failing, we have not discontinued it as yet."

Today most hotels have some sort of employee incentive plan. Unfortunately, most of these plans are ineffective and a waste of money. The plans rarely reap their intended results. But the need for an incentive plan just cannot be negated from the work atmosphere. People are hired and expected to perform their best but most people need and want some external motivation. Humans have ups and downs, times when they focus and times when they lose focus. The role of a good manager is to guide employees to work on what is most important in the most efficient manner. Providing employees incentives is one tool that management can use, but with proper planning.

Incentive plans fail when the structure is targeted too broadly and not focussed on individuals or teams. The typical profit-sharing plan where it is 'one for all and all for one' does not motivate anyone. This type of profit sharing becomes an entitlement. Employees need to have a clear understanding of the linkage between their effort and their incentive compensation. A well-designed employee incentive compensation plan will make each department or individual focus on things they can control. The best plans encourage the behaviors that help create successful results.

Lancelot Cutinha, director of human resources, JW Marriott, Mumbai, says, "While incentivising, incremental contribution should be measurable otherwise it will be vague. The whole process should lead to a win-win situation. The Marriott has one of the most matured employee incentive plans, where a percentage of profit is shared with its performing employees based on customer satisfaction, employee satisfaction, financial results, market share, brand standard performance, etc."

A typical employee incentive plan should include a three-tier approach of immediate recognition for a job well done, short-term rewards for performance over a month or quarter, and long-term rewards for being a loyal employee over the years. Layering incentives is a good way to reach employees from different perspectives. Those who like immediate satisfaction will get it and those who look long-term will be satisfied as well.

"Loyalty is defined in a new way today. Previously, there was nothing called as variable pay. It is a matter of our culture. Sometime back, promotion was based on seniority, but now it is purely performance based and employee incentive programs are a very powerful concept where employees can understand and see the connection between their performance and their rewards," says Cutinha.

Employee incentives keep the staff interested and motivated. They can be successful because of it. After a while, they will just be successful because they want to be. But according to Shenoy, "Incentives are not always necessary to work right. However robust the model might be, it could seriously affect the efficiency of the hotel staff. For a certain period of time, it might be fine, but then it starts to become a habit, a habit to expect, which could be dangerous. We at Orchid are fast expanding and our employees know it. We provide them good working conditions, a robust brand, a competitive salary package and our staff then starts to see the brand rather than the incentive. It has worked with us pretty well."

Incentives however are not a bad thing if awarded appropriately. Incentives do strengthen the link between an individual's performance and that of the hotel, and overall business performance improves as a result.

A successful incentive plan does not stand alone but is part of a larger, integrated reward scheme and human resources strategy. Before implementing an incentive scheme an organisation or department must carefully define the goals of the scheme, how it fits into the overall HR strategy, and how much weight the incentive carries in the overall reward package.