How to design incentives for retaining critical worker?


It is important for companies to consider how they can reward and retain their critical employees, and employers need to think about how they are going to adjust their pay plans either across the board for everybody or by focusing on those pockets of at-risk employees.

1. Employee compensation strategies

Therefore they have to

Allot funds carefully.

Companies can fund a range of pay programs, including merit pay budgets that adjust base salaries and one-time or ongoing incentives.

With limited funds, companies need to make careful choices about whether and to what extent to fund these plans.

Consider customized incentives. The beauty of incentives is their flexibility. If a company needs to retain a certain group of employees, achieve certain business results, or meet any other goal, a carefully designed and communicated incentive can help get them where they want to go.

Factor in the needs of the target employees. “Companies can develop different kinds of reward plans for different types of people,”.

Sales staffs have long had customized incentives because sales results are relatively easy to tie to revenue goals.

Companies apply the same idea other parts of the organization with similar results.

For example, technology companies can design incentives targeted to software engineers or design architects with measures based on new product development or programming milestones.

Differentiate high performance.

Any successful reward program needs to differentiate among the performers.

Everyone should have the same opportunity but that does not mean everybody should get the same pay out.

Effective employee compensation strategies stem from one fundamental principle: money alone will not retain most employees. In the old days, companies essentially paid people for their time. Today, more and more companies pay for performance – in every position, not just sales.

To retain employees, your compensation plan needs to incorporate this trend.

The incentive should be large enough to induce workers to achieve it.

Pay-for-performance plans come in a variety of shapes and sizes, but they all involve two basic activities: defining the job and checking performance against expectations.

The time lag between performance of the work for which the payment for the incentive is due and actual payment should be reduced to minimum.

When people exceed expectations, give them a bonus. It helps to lay the plan out ahead of time so that employees understand your expectations and know what they have to do to get the bonus. But make sure you base it on predefined profit goals, so that you don’t pay out if the company doesn’t make money.

If you’re not offering some type of incentive or pay-for-performance plan, you’re putting your company at a terrible disadvantage.

Smart employers use a variety of hard (monetary) and soft (non-monetary) employee compensation strategies to make it difficult for other companies to steal their people away.

These include:

  • Discuss total employee compensation (salary, benefits, bonuses, training, etc.).
  • Design reward systems to stimulate employee involvement.
  • Use flexible employee benefits to respond to a changing workforce.
  • Offer stock options.
  • Offer time off, sabbaticals and other forms of non-financial employee compensation.
  • Provide childcare and/or eldercare.
  • Provide employee assistance programmes.
  • Arrange for discounts on purchases.
  • Arrange for professional services.
  • Fund fitness club memberships.

2. Working environment

The primary employee retention strategies have to do with creating and maintaining a workplace that attracts, retains and nourishes good people. The overall goal is to make your company a place where people want to come to work.

Not everyone is motivated solely by money. Many types of employees also need a work environment in which they can thrive. Therefore, “rewards need to be broader than just an incentive plan, such as flexible working arrangements or whatever else is important to that group of people,” says Bienstock. “Find out why they are coming to work and what motivates them once you have them.”

3. Employee relationship strategies

Employee relationship strategies have to do with how you treat your people and how they treat each other. Developing effective employee relationship strategies begins with three basic steps:

Supervises and managers should be given relationship training. They will then work effectively with people which helps in retaining the employees.

4. Employee support strategies

Employee support strategies involve giving people the tools and equipment to get the job done. When people feel they have what they need to perform, job satisfaction increases dramatically. All employee support strategies stem from three basic principles:

  • People want to excel.
  • People need adequate resources to get the job done.
  • People need moral and mental support from you and your managers.

Other employee support strategies include:

  • Give people productive work to do.
  • Provide challenges.
  • Remove obstacles and barriers to getting the job done.
  • Adjust jobs to fit strengths, abilities and talents.
  • Keep the promises you make.
  • Establish effective communication systems.
  • Clearly define job responsibilities and accountabilities.
  • Encourage people to take initiative.
  • Encourage, recognise and reward creativity and innovation.
  • Avoid micro-management.
  • Reduce reporting requirements.
  • When possible, offer job flexibility.

5. Employee growth strategies

Employee growth strategies deal with personal and professional growth. Good employees want to develop new knowledge and skills in order to improve their value in the marketplace and enhance their own self-esteem.

Training and education can include:

  • in-house curriculum for skills training and development
  • outside seminars and workshops
  • paying for college and continuing education
  • CD/DVD, podcast and online learning
  • cross-training
  • having employees present workshops in their areas of expertise
  • bringing in outside experts to educate employees about subjects that affect their personal lives.

Other recommended employee support strategies include:

  • Establish a learning culture.
  • Create individual learning plans.
  • Encourage people to join professional and trade associations.
  • Invest in career planning.
  • Operate a corporate mentoring programme.
  • Provide incentives for learning.
  • Take advantage of internet learning.


Keep in mind that employee compensation constitutes only one piece of the puzzle. If all the other pieces – the environmental, relationship, support and growth strategies – don’t fit together into one interlocking whole, you won’t be able to pay people enough to work for you.

In today’s market, employees have control. They say: “You’re lucky to have me working for you.” If you don’t believe that and treat them accordingly, they will quickly find another employer who will. That’s why you need to have all five of these employee retention strategies in place.


No matter what pay programs a company chooses, CFOs have a critical role to play in their design. Considering that employee compensation is the largest fixed cost for most companies, it makes sense for HR and finance to team up to ensure the greatest possible return on investment for these funds. The CFO can play a particularly important role when it comes to developing appropriate performance metrics and selling the need to shift compensation dollars to various types of pay programs based on identified needs.

Posted in Mpm