Incentivized Reviews: How Accurate Are They? Research shows that of customers read product reviews. It’s no secret that the sheer numbers of online reviews are skyrocketing as consumers share more and more data on their product and customer experience.
As reported by, the vast majority of the world’s data was created in the last few years. With so many online reviews out there, we decided to look at how incentivized consumer reviews fare against regular reviews from consumers that were not incentivized. Is one better than the other? More positive? Are they similar in the topics they cover and level of detail? are written by consumers who received the product for free or got a discount coupon in return for a review.
Consumer insights professionals often read product reviews seeking an unmediated picture of, The question is, how accurate are the insights gained from incentivized reviews? We used the Revuze Explorer platform to analyze data collected from the razors and razor blade industry.
What does this mean incentivized review?
If a consumer receives an incentive for submitting a review, that review is called an incentivized review. An incentive might include: Entry into a sweepstake. Coupons or discounts.
Is it ethical to incentivize reviews?
Answer: – In addition to fake reviews that might be posted on review sites by shady competitors, scammers who ask for money to have them removed, or former disgruntled employees and their friends, sometimes you simply get—and possibly deserve—bad reviews.
- Unfortunately, those who take the time and effort to write a bad review are often those guests who have a particularly terrible experience and feel compelled to share it with others.
- The same may be true for enthusiastic guests who had a wonderful experience dining with you.
- What is often missing from review sites is your majority of perfectly content guests who are neither angry nor overjoyed but simply feel they got what they paid for and had a fine experience.
If you can encourage a portion of those guests to review you positively, it can work well to boost your ratings and overshadow the hate. I have seen operations encourage guests to review them via signage, a note on the check, a verbal request from the server or host upon exit, or a response from the manager in reply to praise.
- Any of these strategies can be fruitful, and I would encourage you to see what works to balance bringing in good reviews without guests feeling like they are being pestered or have a burdensome homework assignment.
- I have also seen operations offer a discount or free item on a future visit in exchange for a positive review.
I would advise against offering incentives for reviews, as this could both violate the terms of review sites as well as Federal Trade Commission (FTC) guidelines, Based on the FTC’s Endorsement Guides, it can get messy for you and the guest if the reviewer does not disclose that they received an incentive in exchange for posting the review.
- Likewise, disclosing that they did receive an incentive to post a review, while ethical, may have readers lose faith in the objectivity or authenticity of the review.
- As always, this opinion column is not legal advice and local regulations may vary.
- Check with your attorney and restaurant association for guidance specific to your needs.
More on managing guest reviews here.
Does Amazon allow incentivized reviews?
Anti-Manipulation Policy for Customer Reviews Customers trust that they can shop with confidence on Amazon. Reviews provide a forum for sharing authentic feedback about products and services – positive or negative. Any attempt to manipulate reviews, including by directly or indirectly contributing false, misleading or inauthentic content, is strictly prohibited.
- We take the integrity of our reviews platform very seriously.
- If we determine that you have attempted to manipulate reviews or violated our guidelines in any other manner, we may immediately suspend or terminate your Amazon privileges, remove reviews, and delist related products.
- In addition, if we determine that an Amazon account has been used to engage in review manipulation, remittances and payments may be withheld or forfeited.
Misconduct may also violate state and federal laws, including the Federal Trade Commission Act, and can lead to legal action and civil and criminal penalties. We pursue lawsuits for reviews manipulation against dishonest sellers and manufacturers who attempt to purchase fraudulent reviews and the parties who provide and post those reviews.
These lawsuits have produced monetary judgments exceeding the annual revenue for such sellers and data allowing us to take additional enforcement actions against others. We suspend and ban the accounts of others who engage in review abuse or otherwise violate our guidelines. We will continue to remove reviews that violate our policies and pursue the sellers and manufacturers who create the demand for fraudulent reviews and the individuals and organizations who supply fraudulent reviews through all available means.
We encourage anyone who suspects that review manipulation is taking place or that our guidelines are being violated in any other manner to notify us. We will investigate the concern thoroughly and take any appropriate actions. : Anti-Manipulation Policy for Customer Reviews
Does Google allow incentivized reviews?
4. Posting Fake Or Misleading Content – Businesses should avoid posting fake or misleading content in their reviews. This includes making false claims about their products or services or pretending to be a customer. Such practices can mislead customers and damage the credibility of the business.
Is incentive pay a good thing?
Two HR experts debate the issue. Bonuses increase productivity and improve business results. As long as commerce has existed, there have been varying forms of incentive pay to motivate employees and drive behaviors that result in improved business outcomes. The most obvious and common type are incentives for increased sales. In this arena, there’s no doubt that incentive pay works. In a 2010 joint Harvard Business School and Yale School of Management study on whether bonuses boost sales productivity within the sales force of a large office supply company, researchers found that:
Bonuses do increase productivity.Quarterly bonuses increase sales force productivity more than annual bonuses.Salespeople tend to give up when they’re far away from reaching a quota, but they don’t slow down once a quota is reached, especially if their firm offers commissions for overachievement.
For nonsales roles, the data is equally compelling. More companies are offering short-term incentives, according to a 2018 report by WorldatWork, which surveyed 325 companies, nonprofits and government organizations. The survey results showed that 96 percent of the responding companies had short-term incentive programs in 2017, up from 94 percent in 2015.
Spending on short-term incentives rose to a median of 6 percent of operating profits, up from 5 percent in 2015. In addition, about 66 percent of nonexempt employees were eligible for annual incentives, up from 52 percent. In the survey, 74 percent of respondents said their organization’s annual incentive plan was “moderate to effective” in achieving its objective.
That rating, along with the increase in the use of incentives, shows that compensation professionals find them successful. Incentive pay, which is a variable form of compensation, can benefit employers in other ways as well. “During volatile economic times, the use of variable pay allows a company to reward individuals and teams based on current profits and productivity, without the promise or expectation that such rewards will be offered continuously,” according to a 2014 article in the International Journal of Human Resource Studies.
For my company, Stiles Corp., dealing with the cycles inherent in the real estate and construction industry is challenging. By carefully managing the fixed cost of salaries and using incentive plans, we have been able to better weather economic downturns, including the Great Recession. Yes, there are times when incentive plans don’t work, or even backfire.
Witness the debacle with Wells Fargo, which has cost the company billions in fines, lost business and brand damage. Cases like these are most likely the result of poor plan design or administration. Another important requirement for incentive plans to be effective is organizational trust between employees and managers.
There are many more cases of incentive plans working than not. Group incentive plans can contribute to organizational collaboration and achievement of company goals. For best results, companies should emphasize the need for employees to track and communicate progress toward organizational goals and, most important, to share how the employees’ actions directly correlate to those goals, according to Bill Fotsch and John Case, writing in a 2018 Forbes article, “The Key to an Effective Incentive Plan.” Incentive pay plans that are properly designed and administered within an organization that has a culture of trust can benefit both the employee and employer, motivating and rewarding workers.
And, the practice will be around for a long time. George Boué, SHRM-SCP, is vice president of human resources for Stiles Corp., a commercial real estate company in Fort Lauderdale, Fla., and a member of SHRM’s Special Expertise Panel on HR Disciplines. Incentive pay can tempt employees to act improperly. One of the main arguments against incentive pay is that it can encourage employees to act in an improper, unethical and even illegal manner. If an employee falls short of his goals, he might be tempted to bend the rules to achieve his target so that he can receive a bonus.
- Wells Fargo’s experience is a highly visible example of incentive pay plans gone horribly wrong.
- Employees were paid incentives based on the number of bank accounts they opened.
- In 2016, Wells Fargo was fined $185 million after regulators found that employees were opening additional bank accounts for customers without customers’ permission.
Numerous studies have shown that paying employees financial incentives to meet their goals can lead employees to make poor decisions and engage in dishonest activity. Here are some other disadvantages of incentive pay: Over time, it can create a sense of entitlement, decreasing motivation and lowering performance.
In the early 1990s, Hewlett-Packard managers implemented 13 different incentive pay programs at various sites. Initially, employees met their goals. In response, the managers raised the goals, which lowered incentive pay. Workers grew dissatisfied. Managers found that workers were less motivated, leading to large variances in team performance, according to a 2002 study.
It can negatively affect employees’ job satisfaction. A study published in the Harvard Business Review in 2017 that surveyed more than 13,600 employees in the United Kingdom found that profit-related incentive pay resulted in lower job commitment and trust in managers.
It also found that performance-related incentive pay made employees feel increased pressure at work. It can create an overly competitive workforce not focused on quality. Incentive plans that reward only certain segments of an organization can make nonrecipients envious and can lead to increased turnover among consistent performers in other departments.
It can create tension among co-workers. Team bonuses can create animosity between high-performers and those who produce less. In addition, low-performers could feel pressured by others to perform at a level they can’t achieve. It can increase pay inequality for women.
- A study by ADP Research Institute released last year has shown that women, on average, are paid 17 percent less in base salary than men.
- When incentive pay is added, the pay gap increases by 2 percentage points.
- Other research has shown that female executives receive less incentive pay than males.
- It can be expensive when things go wrong.
As the Wells Fargo case shows, when incentive plans go awry, the cost to employers can far outweigh any benefit. A study published in Organization Science in 2016 found that an incentive pay plan aimed at boosting attendance in five factories decreased productivity by 1.4 percent because conscientious, internally motivated employees who were performing well before the program was implemented felt it was unfair.
- In light of these downsides, organizational leaders should proceed with caution in implementing an incentive pay program.
- They should consider both the intended—and unintended—consequences and should determine whether incentive pay is an ideal fit for their organization.
- If they ultimately decide to implement a program, they should monitor it closely to ensure that it’s achieving the desired goals.
Danielle M. Corradino is human resources director at The Corradino Group, an engineering and urban planning company in Doral, Fla., and a member of SHRM’s Special Expertise Panel on Ethics/Corporate Social Responsibility & Sustainability.
How do you incentivize reviews?
Offer incentives – One of the simplest ways to motivate your customers to write reviews is to offer them incentives, such as discounts, vouchers, loyalty points, or freebies. You can create a referral program, a loyalty scheme, or a contest to reward your customers for their reviews.
Is it illegal to incentivise reviews UK?
How to identify who posted a fake online review – In most cases, it is possible to obtain a disclosure order, a subpoena or a Norwich Pharmacal Order to compel website operators to provide details about any user who you suspect had posted a fake online review against your business.
Depending on the country where the website operator is located, you will need to choose the best method to help you identify who wrote the fake online reviews about your business. In most cases, you can obtain a Norwich Pharmacal Order in a court in England, which will subsequently be honoured by website operators in the United States.
However, it is best to check with us first as in some cases, if you obtain a disclosure order in England against a website operator in the United States, the foreign website operator might require you to domesticate the disclosure order before they provide you with details of the identity of the individual who posted the fake reviews about your business.
Can companies create fake reviews?
Is It Illegal to Write a Fake Review? – Fake reviews are a violation of the terms of service of all business review sites, This means that any attempt to manipulate your brand reputation — or harm that of your competitors — through fake reviews can result in legal action against you.
- Providing customers with incentives to write reviews of your company can also have repercussions.
- According to the “Guides Concerning the Use of Endorsements and Testimonials in Advertising” by the Federal Trade Commission (FTC), reviews are considered endorsements.
- If there is a form of incentive or compensation or close relationship between an individual giving an endorsement and a company receiving it, this should be made explicit.
The FTC also considers it illegal to incentivize reviews even if there’s no requirement that the review be positive. According to the guides : Advertisers (companies) and endorsers (customers who provide endorsements) may be liable for false or unsubstantiated claims made in an endorsement, or for failure to disclose material connections between the advertiser and endorsers.
Can you bribe customers for reviews?
How do you offer discounts for reviews? – Offering discounts can improve your review request rate. People are more likely to open your email when you mention the discount in the review-request email subject line. Not only does offering a discount improve open rates, but it also encourages customers to return to your store to buy again! Here’s how you can offer discounts in exchange for product reviews
- Decide how much the discount will be
- Disclose if the discount is eligible for all orders or orders over a certain amount
- Give both positive and negative reviews the same discount.
Consider offering a higher discount when asking for a photo or video review.
It’s best to allow your discount to be applied to all orders since your customer is doing you a favor.
How does Amazon incentivize employees?
Employee Benefits Along with average hourly pay of $19—more than double the federal minimum wage—Amazon offers a range of great benefits that support employees and eligible family members, including domestic partners and their children. These comprehensive benefits begin on day one and include health care coverage, paid parental leave, ways to save for the future, paid college tuition, and other resources to improve health and well-being. We want employees to have access to the skills they need to grow their careers. Amazon is investing more than $1.2 billion to provide free upskilling opportunities to more than 300,000 U.S. employees, to help them further their careers in high-paying, in-demand roles. Amazon’s more than 750,000 operations employees in the U.S. are eligible for fully funded college tuition, including the cost of classes, books, and fees. : Employee Benefits
Why does Amazon reject reviews?
Community Guidelines Guidelines for keeping the Amazon Community helpful, relevant, meaningful, and appropriate. The community is a place to share your thoughts and experiences (positive and negative) with other customers. The following guidelines explain what’s allowed and not allowed.
Reviews (including star ratings) Questions and answers Helpful votes Lists and registries Profile pages Amazon Follow #FoundItOnAmazon Amazon digital and device forums Abuse reports
Actions you take, including:
Sharing text, photos, videos, or links Marking a review as “helpful”
Interactions with other community members and Amazon
The guidelines don’t apply to content in products or services sold on Amazon (e.g., content of a book). If you have an Amazon account, you can:
Create and update shopping lists, wish lists, or registries Update your profile page Participate in digital and device forums
To do any of the following, you need to have spent at least $50 on Amazon.com, using a valid credit or debit card, in the past 12 months:
Create reviews (including star ratings) Answer customer questions Submit helpful votes Create idea lists Follow other contributors
Promotional discounts don’t count towards the $50 minimum spending requirement. Seller, order, or shipping feedback We don’t allow reviews or questions and answers that focus on:
Sellers and the customer service they provide Ordering issues and returns Shipping packaging Product condition and damage Shipping cost and speed
Why not? Community content is meant to help customers learn about the product itself, not someone’s individual experience ordering it. That said, we definitely want to hear your feedback about and, just not in reviews or questions and answers. Comments about pricing or availability It’s OK to comment on price if it’s related to the product’s value.
For example, “For only $29, this blender is really great.” Pricing comments related to someone’s individual experience aren’t allowed. For example, “Found this here for $5 less than at my local store.” These comments aren’t allowed because they aren’t relevant for all customers. Some comments about availability are OK.
For example, “I wish this book was also available in paperback.” However, we don’t allow comments about availability at a specific store. Again, the purpose of the community is to share product-specific feedback that will be relevant to all other customers.
Content written in unsupported languages To ensure that content is useful, we only allow it to be written in the supported language(s) of the Amazon site where it will appear. For example, we don’t allow reviews written in French on Amazon.com. It only supports English and Spanish. Some Amazon sites support multiple languages, but content written in a mix of languages isn’t allowed.
Learn on this Amazon site. Repetitive text, spam, or pictures created with symbols We don’t allow contributions with distracting content and spam. This includes:
Repetitive text Nonsense and gibberish Content that’s just punctuation and symbols ASCII art (pictures created using symbols and letters)
Private information Don’t post content that invades others’ privacy or shares your own personal information, including:
Phone number Email address Mailing address License plate Data source name (DSN) Order number
Profanity or harassment It’s OK to question others’ beliefs and expertise, but be respectful. We don’t allow:
Profanity, obscenities, or name-calling Harassment or threats Attacks on people you disagree with Libel, defamation, or inflammatory content Drowning out others’ opinions. Don’t post from multiple accounts or coordinate with others.
Hate speech It’s not allowed to express hatred for people based on characteristics like:
Race Ethnicity Nationality Gender Gender identity Sexual orientation Religion Age Disability
It’s also not allowed to promote organizations that use such hate speech. Sexual content It’s OK to discuss sex and sensuality products sold on Amazon. The same goes for products with sexual content (books, movies). That said, we still don’t allow profanity or obscene language.
We also don’t allow content with nudity or sexually explicit images or descriptions. External links We allow links to other products on Amazon, but not to external sites. Don’t post links to phishing or other malware sites. We don’t allow URLs with referrer tags or affiliate codes. Ads or promotional content Don’t post content if its main purpose is to promote a company, website, author, or special offer.
Conflicts of interest It’s not allowed to create, edit, or post content about your own products or services. The same goes for services offered by:
Friends Relatives Employers Business associates Competitors
Solicitations If you ask others to post content about your products, keep it neutral. For example, don’t try to influence them into leaving a positive rating or review. Don’t offer, request, or accept compensation for creating, editing, or posting content.
It’s OK to post content other than reviews and questions and answers, but you need to clearly disclose your connection. However, brands or businesses can’t participate in the community in ways that divert Amazon customers to non-Amazon websites, applications, services, or channels. This includes ads, special offers, and “calls to action” used to conduct marketing or sales transactions. If you post content about your own products or services through a brand, seller, author, or artist account, additional labeling isn’t necessary. Authors and publishers can continue to give readers free or discounted copies of their books if they don’t require a review in exchange or try to influence the review.
Plagiarism, infringement, or impersonation Only post your own content or content you have permission to use on Amazon. This includes text, images, and videos. You’re not allowed to:
Post content that infringes on others’ intellectual property (including copyrights, trademarks, patents, trade secrets) or other proprietary rights Interact with community members in ways that infringe on others’ intellectual property or proprietary rights Impersonate someone or an organization
Illegal activities Don’t post content that encourages illegal activity like:
Violence Illegal drug use Underage drinking Child or animal abuse Fraud
We don’t allow content that advocates or threatens physical or financial harm to yourself or others. This includes terrorism. Jokes or sarcastic comments about causing harm aren’t allowed. It’s also not allowed to offer fraudulent goods, services, promotions, or schemes (make money fast, pyramid).
Remove their content Limit their ability to use community features Remove related products Suspend or terminate their account Withhold payments
If we find unusual reviewing behavior, we might limit the ability to submit reviews. If we reject or remove someone’s review because it violates our, we won’t accept any more reviews from them for the same product. If someone violates state and federal laws, including the Federal Trade Commission Act, we might take legal action that results in civil and criminal penalties.
Use the “Report abuse” link near the content you want to report. If there’s no “Report abuse” link, email [email protected]. Tell us where the content is and why you think it’s a violation. If someone offers you compensation to create, edit, or post content that violates our guidelines, forward the offer to [email protected].
Contact information Product detail page Screenshot of the compensation offer
After we receive your report, we’ll investigate and take appropriate action. : Community Guidelines
What is Amazon incentive?
Amazon Incentives – Organizations can reward customers, motivate employees, boost research participation and simplify payment disbursements by using Amazon Gift Cards in their employee and customer incentives program. Learn more
Can you buy 5 star Google reviews?
Can you buy real Google reviews? Yes, you can buy real reviews on Google. Multiple websites sites sell authentic reviews written by real people who will give you positive, legit reviews on your business profile and 5-star ratings.
How many 5 star reviews does it take to increase Google rating?
If you’re like most business owners, you’re always looking for ways to improve your online rating. After all, potential customers are more likely to choose a business with a high rating over one with a lower rating. But how do you raise your rating? Use our 5-star rating calculator to find out.
This tool helps you figure out how many reviews you need to get an overall 5-star rating. For example, let’s say you have 100 reviews and your average rating or overall score is 4 stars. Obviously, you got a few negative reviews. Your goal should be to get to a 5 star overall score as fast as possible.
To do that, you’ll need 25 more 5-star reviews. And when google updates your review score you will have 5 stars. So start asking your satisfied customers to leave a review, and watch your rating soar! The 5-star rating calculator is a handy little tool that can help you figure out how many more reviews you need to get your overall or average rating to 5 stars.
Here are a few examples of how to use it correctly: 1. Enter the current number of reviews you have.2. Enter the current average rating you have.3. Enter the number of stars you want to achieve.4. The calculator will calculate how many more reviews/new reviews you need in order to achieve your desired star rating.
So, there you have it! A step-by-step process on how to use the 5-star rating calculator correctly. Use it wisely and soon you’ll be on your way to 5-star glory! There’s no question that online reviews are important. They can make or break a business, and they’re often one of the first things potential customers look at when they’re considering making a purchase.
They google your business name and look at your online listings, to see others’ feedback on using your service or services. It’s easy to see why lots of 5-star user ratings will get you more customers! But what if you’re not getting as many 5-star reviews as you’d like? Enter Review Grower. We’re a tool that helps businesses get more positive reviews, and we’re pretty darn good at it.
Here’s how it works: we send automated follow-up emails to customers after they’ve made a purchase, and we ask them to leave a review. We give them the option to leave a review on Google, Yelp, Facebook, or wherever else they prefer. And if they have any problems with the product or service they received, we offer to help them resolve the issue before they leave a negative review.
- It’s a win-win for everyone involved.
- So if you’re looking for a way to get more 5-star reviews, Review Grower is definitely worth checking out.
- We’ll help you boost your online reputation in no time! Thanks for checking out our free 5-star rating calculator! We hope you found it useful in helping you boost your business.
If you’re looking for even more ways to improve your ratings and reviews, be sure to try our 30-day trial of Review Grower. With our powerful review generation, review management, and review marketing tools, you’ll be able to take your business to the next level.
What are the pros and cons of incentive pay?
Conclusion – Incentive bonuses are used in organizations to motivate employees to achieve goals. They can include monetary amounts or they can be in the form of vouchers, time off, team outings, etc. There are many benefits to implementing incentive structures, such as increased job satisfaction, motivation, teamwork, communication, and loyalty to your business.
Can you incentivize Tripadvisor reviews?
Businesses are welcome to encourage their guests to submit reviews when they return home. However, no one affiliated with the business can offer incentives, discounts, upgrades, or special treatment on current or future stays in exchange for reviews.
Why do you incentivize?
What is an employee incentive? – According to Burak and Smith, “An incentive scheme is a plan or programmes to motivate individuals for good performance. An incentive is most frequently built on monetary rewards but includes a variety of non-monetary rewards or prizes.” When it comes to employees, rewards and incentives in the workplace have benefits for both employees and employers.
When recognising employees for their performance and productivity, it can improve morale, job satisfaction and motivation to support organisations in achieving their aims. Through workplace rewards and incentives for employees, employers and staff alike can enjoy a positive working environment and can go a long way in boosting productivity.
Just as an incentive can motivate you, offering your teams rewards can encourage them to work hard and grow, and more importantly, feel appreciated and recognised for their good work, and incentives are one way to show them that. Which is why employee incentives and benefits are crucial to an organisation’s survival.
What is incentivized compensation?
What is incentive compensation? – Incentive compensation is a form of variable compensation in which a salesperson’s (or other employee’s) earnings are directly tied to the amount of product they sell, the success of their team, or the organization’s success.
Incentive compensation management is the strategic use of incentives to drive better business outcomes and more closely align sales rep behavior with the organization’s goals. Incentives can be structured in multiple ways, including straight commissions, bonuses, prizes, “spiffs,” awards, and recognition.
A company’s incentive compensation plans must align to corporate goals but maintaining this alignment can be difficult. To help, we’ve put together an introduction to incentive compensation.
What is incentive pay for performance?
|“My labor costs went down 50 percent for the same amount of production, The hard-working person was making, I use incentive pay for other jobs as well, such as potting plants—I wish I could use it for everything!” 2
|Tennessee Nursery Grower
Incentive pay, also known as “pay for performance” is generally given for specific performance results rather than simply for time worked. While incentives are not the answer to all personnel challenges, they can do much to increase worker performance.
- In this chapter we discuss casual and structured incentives.
- Although each rewards specific employee behaviors, they differ substantially.
- In structured incentives, workers understand ahead of time the precise relationship between performance and the incentive reward.
- In a casual approach, workers never know when a reward will be given.
Casual Incentives The simplicity inherent in the casual incentive approach attracts many farmers who would not consider a structured incentive. Casual rewards include a pat on the back, a sincere thank-you, a $50 bill, a dinner for two at a local restaurant, or a pair of tickets to the rodeo (workers may have excellent suggestions along these lines).
- You may want to entitle workers to choose from a menu of several rewards.
- Accompanied by a specific commendation, “This is for reducing our total harvest-time machinery break downs,” the reward is more effective than “thanks for all you do.” To be of use, these casual incentives must be given at unexpected intervals,
A bonus given routinely soon becomes part of the expected compensation package. Casual incentives communicate to employees that you have noticed their efforts. People thrive on positive feedback. Drawbacks. Three possible drawbacks to the casual incentive approach may include (1) envy among employees, (2) feelings among workers that the supervisor may be acting out of favoritism, and (3) the use of rewards to maintain social distance,
- While there are times when praising workers in public is appropriate, at other times it may do more harm than good.
- An example of the latter is when coworkers hear a direct or implied comparison between the rewarded employee and themselves.
- Even though workers are likely to tell others about their rewards anyway, the force of the comparison is reduced when you give casual incentives privately.
Perceptions among workers that rewards are given in a capricious or arbitrary manner, however, may still remain. One way of overcoming both envy and favoritism challenges may be by having workers nominate others for these casual awards. The nominating procedure should be kept simple.
- Recognition coming from fellow employees is unlikely to cause resentment and is one of the most sincere forms of praise.
- This type of recognition could even be given in public.
- Unfortunately, chances are that workers will be rewarded for their popularity.
- Sometimes employees are reaching for a positive stroke : an acknowledgment that their superior performance has been noticed.
While casual incentives can be very appreciated rewards, they can also be used to keep a social distance from the persons to whom they are given. This may happen, for instance, if an employee receives a monetary reward when he was reaching for psychological proximity instead.
- Only you can discern your employee’s needs in a given situation.
- After all, both workers and situations vary.
- Suggestion Plans.
- Suggestion plans may also be handled under a casual incentive system.
- You may want to recognize personnel for suggestions resulting in savings or increased productivity.
- In one instance, a farmer saved thousands of dollars after an employee suggested a more frequent adjustment to the scales.
This farmer had been giving away carrots for some time.3 Employee suggestions that require small capital or labor outlays to implement, such as what was needed to keep the scale adjusted, should generally result in larger rewards. Expensive or difficult to implement suggestions may not yield any pay reward but a simple acknowledgment to the worker.
- You must decide whether to reward all workers or only the authors of an accepted suggestion.
- There may be a balance that rewards teamwork and individual creativity.
- Regardless of approach, a functional suggestion system needs management follow-through.
- Receipt of worker recommendations, as well as possible action to be taken, needs to be acknowledged promptly to those who make the proposals.
Not every suggestion will be accepted, yet employees should be kept informed on the status of suggestions. A structured incentive plan, discussed next, helps both workers and management improve communications. Structured Incentives Structured incentives can help direct employee efforts.
Other benefits include cost certainty and cost reductions for the farmer. Benefits to employees include higher pay and satisfaction. Farmers’ feelings about structured incentives generally fall into four groups: 1. Incentives work well —they have either helped motivate or maintain high worker performance.
A Stanislaus dairy farmer spends $5,000 to $7,000 each year to implement his incentive program and gets $55,000 to $57,000 back. Many farmers experience a 40 percent cost-savings when moving from hourly to piece-rate paid wages.2. Challenges posed by incentives —Top concerns about incentives from a farm survey 4 included: (a) poor quality work (or neglect of important goals not directly rewarded by the incentive); (b) no change in worker performance; (c) difficulty in setting standards; (d) change in work methods or technology; and (e) excessive record-keeping.3.
- Incentives do not apply to present needs.4.
- Incentives are not used because of lack of information on how to establish them.
- Workers are also divided in their feelings about incentive pay.
- One dairy employee said incentives are what farmers pay when they do not want to pay workers a fair wage.
- Another milker, in contrast, was very enthusiastic about the incentive program the dairy farmer had instituted: it made him feel part of a team.
Orchard, vineyard, and vegetable crop crew workers are also split on incentives. Despite the benefits of piece-rate pay, crew workers in one study were evenly divided between those who favored hourly pay and those who liked piece-rate pay. The most common reason for preferring piece-rate pay was increased earning potential.
Workers could acquire greater earnings in fewer hours of work, even though it took more effort to do so. Worker preference for hourly work fell into three general categories. Crew workers (1) felt that piece rate was unfair (they were mostly concerned about what they viewed as game playing in how piece rates were determined), (2) preferred the pace of hourly paid work, or (3) associated other benefits with hourly pay.5 Despite the potential perils, when properly designed and implemented to protect both farmer and farm personnel, structured incentives work well.
Examples of structured incentives A structured incentive (1) must be capable of fluctuating (variable pay) as performance changes, and (2) is based on a specific accomplishment-reward connection understood by both management and workers. Examples of typical incentives: · piece-rate pay for pruning or picking · allowing workers to go home early, with full pay, when they finish a job · end-of-season bonus for employees who stay to the end · quality or production incentive · bonus for reducing production costs · profit sharing.
Examples of payments or benefits which are not incentives: · most mandated benefits such as unemployment insurance, workers’ compensation · nonmandated benefits that do not fluctuate, such as housing · wage increases, vacation, or rewards that, once earned, are seldom lost · pay tied to time worked (except for bonuses for attendance, difficult shifts, and the like).
Steps in Establishing Structured Incentives This section provides seven guidelines helpful in deciding whether to establish, and how to design and troubleshoot, structured incentive programs.
Analyze the challenge and determine if incentives are appropriate. Link pay with performance. Anticipate loopholes. Establish standards and determine pay. Protect workers from negative consequences. Improve communications. Periodically review the program.
Step No.1. Analyze the challenge and determine if incentives are appropriate The purpose of an incentive program needs to be clear and specific. Slow cucumber picking, high levels of swine death loss in farrowing operations, and sick leave abuse are examples of specific, measurable problems.
Just because a goal can be measured in clear and specific terms, however, does not mean incentives are called for. Incentives may not be appropriate to motivate employees who lack the resources or skills to perform. No amount of incentive will help an unskilled egg production barn manager improve feed conversion.
Because establishing incentive pay structures is not simple, employers sometimes opt for other solutions. In one instance, a dairy farmer tried several ways to improve an employee’s milk quality performance. A veterinarian was called in to demonstrate proper milking techniques, but the improvement was short lived.
- The worker knew how to do the job but was not doing it.
- The producer decided not to implement an incentive pay system.
- Instead, in a last ditch effort, he warned the milker: improve or be fired.
- The milker improved so much that the dairyman gave him a raise a few months later.
- One three-way classification of employee performance is (1) poor, (2) standard, and (3) superior.
Standard performance is what can be expected from a worker just because he has a job. Rewarding workers with incentives for bringing their poor work up to standard would be like paying twice for the same job once for having the employee show up, the other for working.
Instead, an incentive pay program can reward workers who continue to produce superior work, or encourage those who already produce good work to excel. Incentives designed to deal with farm safety seem inappropriate to me. Such incentives may do more to deter the filing of workers’ compensation claims than to reduce accidents.
Workers may hide incidents of injury or illness in order to earn a reward—or avoid the wrath of peers (see Sidebar 8-1). Sidebar 8-1: Safety incentives Safety Incentives reward workers with good safety records (often measured in terms of reportable accidents) or for safety suggestions management considers worth implementing.
Rewards for good suggestions can be positive in the area of farm safety as well as in reducing waste, improving productivity, or other areas. However, it seems peculiar to have to pay workers not to get hurt. After all, it is the worker who has the most to lose by an injury or illness. Instead, farmers may improve their safety record through (1) a policy encouraging a safe working climate, (2) worker training, (3) hazard evaluation and correction measures, (4) safety committees, (5) discipline for violation of safety rules, and (6) careful employee selection, including the use of pre-employment physicals.
In some instances safety incentives that deal with reported accidents may be construed to be illegal, as workers seem to be punished for filing workers’ compensation claims. If you still want to recognize employees for a long accident-free spell at the ranch, you may want to tailor a casual incentive.
- The reward should be given to all and be a simple, low-key, non-monetary prize such as a company hat or picnic.
- Along with the recognition, emphasis should be on safety and on reporting job-related injuries and illnesses, even those appearing insignificant.
- A farmer who pays well, provides positive working conditions, and has a waiting list of employees who want to work for him, does not normally need to turn to incentives to improve punctuality or attendance, except for seasonal work.
Farmers have been successful in providing an incentive for employees to finish out the season and even to return the next one. The most typical approach has been to pay a per-hour or a per-unit incentive (e.g., for each box harvested) to be given to employees who stay to the end of the season, and to match this bonus if employees show up for the next season.
Since finding a sufficient labor supply is becoming increasingly difficult in agriculture, this system can yield good results. Extra pay may also be provided to recognize particularly difficult conditions, such as staying through extra wet months in the dairy. Tradition is not always the best indicator of what programs will work under incentive pay.
Although hoeing and other forms of manual weed removal have customarily been paid by the hour, at least one farmer has been successful in converting from paying by the hour to paying by the row. This farmer went from having workers clean about three rows per day on an hourly basis to a range of nine to 16 rows per day under piecerate.
Incentives are often needed to counteract the effect that crew dynamics has on performance. Hourly paid workers tend to perform as fast as the slowest worker in the crew. Workers paid by the hour tend to cling together, while those paid by the vine tend to spread out, some working much faster than others.
For instance, piece-rate vineyard pruners are, on the average, 37 percent faster than those paid by the hour. Hourly paid crews require an average of 26 man-hours per acre pruned, in contrast to only 19 man-hours per acre for piece-rate paid crews.6 Farmers who have successfully established piece-rate pay have been able to also control for quality (more under loopholes ) of production.
- Step No.2.
- Link pay with performance Some farmers offer end-of-season profit sharing plans “because we did well this year.” Lamentably, there are too many factors that affect farm profits besides worker productivity.
- Weather and market are two external concerns, while farm accounting procedures can be an internal one.
Personnel must trust that the farm enterprise will report profits in a fair and honest way. Workers do not always see a link between their efforts and profits. Another danger is a streak of ever increasing profits followed by several years of deficits.
- While many workers will be very understanding at receiving a reduced profitsharing paycheck for a year, few will tolerate a longer drought without experiencing considerable dissatisfaction.
- One manager shared with me his excitement about a substantial profitsharing bonus.
- As a result, he worked much harder the next year and felt defrauded when that check ended up substantially reduced when compared to the first year.
He soon left that enterprise. In another instance, a worker at an equine and cattle facility explained, “I work with the same amount of effort each month, but some months I get the added bonus of getting a profitsharing check.” The ranch employee was explaining that he did not do anything special to try and get a higher bonus, but that some months he would get one while in others he would not.
Since he was not putting any effort into obtaining the bonus, the employee felt that it was a windfall in those months when he would get something. Instead of being a motivator, profit sharing can discourage employees. Not only are profits dependent on the efforts of the whole organization, but profits can be fickle.
This is true for any organization, but it is especially true in farming where there may be a rash of good years followed by bad ones. Risk sharing is related to profit sharing. Here employees are given higher profitsharing bonuses in good years in exchange for getting a lower base pay than normal in unprofitable years.
That is, in contrast with the normal system of profit sharing, in bad years the employees not only did not earn a bonus, but also lost part of their base salary; in good years, they earned bonuses much greater to what they would have earned normally. It is not surprising that companies favor risk sharing ventures more than employees do ” gambles along with the company.
Clearly, at-risk plans shift some of the risk of doing business from the company to the employee.” It is not surprising that companies find more favor in risk sharing ventures than employees do.7 Any time employees are rewarded or punished for that which they cannot control, farm employers are asking for a cynical or disillusioned workforce.
- All this having been said, some farmers may wish to have a very small profitsharing bonus as a teaching tool for top and middle management.
- Much better than profit sharing, however, is breaking down all elements under the control of employees or management that affect profits and rewarding personnel for achieving results.
A Fortune 500 executive, after explaining three of his most important goals-making an important contribution to society, developing excellent products, and making the organization a good place to work-made quite an impact as a guest speaker by pretending to momentarily forget his fourth goal: “The fourth goal,
there must be a fourth goal. I mentioned it in a speech at, Oh yes, the fourth goal is to make a profit.” 8 Sooner or later, then, when the profit potential is there, the farming enterprise will make money as employees improve their ability to make changes in areas they control. Seasonal fluctuations and other factors may need to be considered when setting incentives.
When attempting to control mastitis in the herd, for instance, a dairy manager has to consider variables beyond the control of her workers. Because mastitis is caused by several factors, it is desirable to consider them all. A milker would soon be discouraged if, no matter how diligently he used any specific prevention technique, the mastitis level was sensitive to improper machinery maintenance or seasonal fluctuations caused by environmental factors.
One way to categorize incentive pay is by whether individuals, small groups, or all farm personnel are covered. Individual incentive plans offer the clearest link between a worker’s effort and the reward. Probably the best-known individual or small group incentive pay plan in agriculture is piece rate,
Piece rate is more suited to crew work (e.g., boysenberry picking, vineyard pruning) than to precision planting, fertilizing, or irrigating. Outcomes from the former tasks are easier to measure—both in terms of quantity and quality—than the latter. Small group and farm wide incentives work better when it is difficult to distinguish individual contributions, or where cooperation and team work are critical.
- Group incentives do not automatically foster team work, however.
- More productive workers may resent less motivated or less talented employees.
- A foreman reported that when his crews were paid a group incentive, the fastest workers would slow down the most.
- This is not surprising, given what we have said in earlier chapters, that the fastest employees are four to eight times more effective than the slowest.
Some of them may ask themselves, “Why rush when we will all get paid the same?” In another operation where workers are paid on a group incentive, it happens often that some of the faster crew workers will pick what they consider their fair share, such as ten boxes of produce, and then “sort of kick the tires, take a lot of trips to the bathroom” and slow down in other ways.
- The faster workers put a lot of pressure on the slower ones,” explained one farm manager, “and we have even had those who felt so harassed they wanted to quit.
- The system has created tension and conflict among the workers.” As the tie between individual work and results is diminished, so is the motivating effect of the incentive on the individual.
If you use small group incentives, such as teams of pickers harvesting into one bin, it helps to have workers choose and control their own teams. When workers who have partial control over results are not included in the incentive pay program, conflicts may arise.
For instance, tension may grow between a field melon packing crew paid on a piece rate, and the hourly paid equipment operator. Step No.3. Anticipate loopholes Being so specific about a single result may cause workers to achieve it at the expense of all others. Examples include the herd manager who reduced the average number of breedings per conception, but did so by culling several of the best milk cows; and the field foreman who increased yields but spent more on production than what the extra yields meant in profits.
Allowing workers to “go home” (with a full day’s pay) when they finish a fixed amount of work (e.g., milking) has the same motivating effect as most output-based incentive pay systems—and similar problems. The incentive is to get done as quickly as possible and go home.
Dairy workers rewarded for detecting cows in heat (as part of a breeding program) may find an unusual number of cows in heat. Instead, workers could be paid for detecting cows in heat that are later confirmed pregnant. The number one loophole for quantity production incentives is often quality, Growers who choose hourly pay over piece-rate pay often cite quality as the main reason for doing so.
A number of approaches are either in use or have been suggested to motivate crew workers while maintaining quality (see Sidebar 8-2). Sidebar 8-2: Approaches toward improved quality while paying a piece rate Hourly base pay with piece-rate pay, The greater the proportion of pay going toward hourly pay, the less importance given to speed of work.
- These farmers may not be getting their money’s worth, however.
- Hourly paid vineyard crews are substantially slower than piece-rate ones without obtaining sizable improvements in quality.9 Speed limit placed on workers.
- It is true employees who work faster than their skill level will do so by neglecting quality.
Unfortunately, limiting worker speed, to be effective, would have to take place on a worker-by-worker basis. A maximum speed standard established for all crew members would likely result in expectations overly high for some and too easy for others. Discipline.
- Minimum standards are set—or workers risk being disciplined.
- This tactic is perhaps the most commonly used and works relatively well (see Chapter 14).
- Quality incentive.
- This method may take more time to set up but has the greatest potential.
- Set up random quality-control inspections or spot checks.
- Substandard scores can result in additional training or discipline.
Superior scores earn a bonus. For instance, a cherry farmer may pay $3 per box picked, with a potential multiplier of 1.084 for good quality or 1.25 for superior quality (about 25 or 75 cents per box, respectively). Three workers picking 24 boxes each in a day would earn $72 (no bonus), $78.05 for good work, and $90 for superior work.
The quality bonus has to be high enough as to provide greater rewards to the careful employee over the one who picks more boxes. Earn the right to work in a piece-rate paid crew. An effective management tool is to have employees work on an hourly paid crew until they can prove their complete understanding of quality considerations.
Only when workers have shown a complete mastery of quality are they moved to a piece-rate paid crew. As a condition of working in the piece-rate crew, workers are expected to keep up high quality performance. This approach can be effectively combined with the discipline and quality incentive above.
When farm labor contractors, supervisors, or crew leaders are paid in proportion to worker earnings, farmers may inadvertently be encouraging less attention to quality. Unless worker earnings are also tied to quality, it does not benefit supervisors to emphasize quality, since workers would have to work slower and supervisors would earn less.
Step No.4. Establish standards and determine pay This process involves clarifying expected performance, considering agricultural variations, noting when it is fair to eliminate incentives, contemplating potential savings and gains, determining base wage versus incentive pay, anticipating effects of technological or biological change, and converting standards into pay.
- Clarifying expected performance.
- The first task is to establish and define standards.
- · Does a vine pruned include removing suckers? Clearing cuttings from the bottom of the vines? Tying canes to the wire? Sawing off dead wood? · Will mortality calculations include all calves—even those born dead or killed by lightning? Or, will a veterinarian conduct a calf autopsy and decide if it was a preventable loss? · How full must picked boysenberry boxes be? · How will the number of stemless, pitted, bruised, or low color cherries per sample affect quality grade? Agricultural variation.
Variations in crop load, vine vigor, or conditions that may affect worker performance need to be considered. Each commodity has its own idiosyncrasies. In grape pruning, there are multiple possible variations from variety to training method to spacing that could affect worker speed.
Yet vine vigor and vine age both contribute most of the differences in pruning difficulty.10 There appears to be a reasonably good fit between required effort in vineyard pruning and brush weight (within a given training system). Piece-rate pay could be based on the pruning brush weight of a random sample of vines within a block.
Deciding pruning costs for vines that are affected by eutypa or other disease, very young vines, or vines that are in their prime becomes much easier to deal with, so it is fair to all involved. Crop density can likewise be used to make decisions about harvest piece-rate pay.
In one orchard operation, 11 crop density is also used to determine how to pay for thinning fruit load. Elimination of incentives. The specific circumstances for eliminating incentives should be clearly related to the incentive and articulated ahead of time. Employees on a milk quality incentive could lose incentive earnings, for instance, if (1) the milk got hot because no one turned on the cooler, (2) cows with antibiotics were milked into the bulk tank, or (3) line filter changes were neglected.
It makes little sense to eliminate a berry picking quality incentive for employees who commit unrelated infractions (e.g., come in late, get into a fight). Any prolonged elimination of incentives risks surrendering any motivational effect the incentive program may have had.
- If the breach is so serious, perhaps the farmer should consider worker discipline or termination.
- Potential savings and gains.
- A dairy farmer trying to reduce calf mortality may ask: how much does it cost me every time a calf dies? 12 Unfortunately, many employers think more in terms of how much they expect workers to earn in an hour—rather than what the incentive program does in reducing costs (e.g., costs per acre).
In a well-designed incentive pay program, a farmer should feel that the more his employees earn, the better off he is. There may be a point where improvements beyond a certain level require a substantially greater effort, yet yield less significant results.
- Efforts may be better directed elsewhere.
- There is a substantial milk production increase when somatic cell counts reduce from log scores of 5 to 4 or 3, but a smaller proportional increase in milk quantities for further improvements.
- For the worker to achieve the first improvements, also, is much easier.
Two conflicting principles must be balanced here: (1) greater worker effort should result in greater pay; and (2) greater employee earnings should result in increased profits for the ranch. You may need to create a reward structure with a ceiling beyond which no additional pay increments are obtained.
Base wage versus incentive pay. Some incentives constitute 100 percent of a worker’s wages. Other incentives are combined with base wage earnings (Chapter 7). As a rule of thumb, the percentage of potential wages represented by incentives should consider the (1) amount of control a worker has over rewarded results, (2) importance of the rewarded results to the overall position, and (3) possible loopholes not covered by the rewarded results.
For instance, pickers and pruners often receive 100 percent of their wages through incentives. As long as quality of work is controlled in some way, this will work well. That is, (1) workers have full control over their performance, (2) the importance of speed is essential to the job, and (3) no important loopholes are neglected, since quality is also considered.
- In contrast, a herd manager does not have full control over calf mortality, nor does calf mortality reduction represent his main job.
- This same manager may also be concerned with herd feed intake, improving milk quality, reducing days open, and supervision of milkers.
- If the loss of a calf is very costly, the importance of the incentive may increase.
A calf mortality incentive in this case, then, could represent somewhere between five percent to 20 percent of potential wages. Anticipate effects of technological or biological change. If new machinery, technology, biological stock or methods are being contemplated, farmers would do well to postpone introduction of new incentive programs until after such changes have been made and their effectiveness evaluated.
- Otherwise, the farmer will not be sure whether it was the technological change or the incentive pay that brought about results.
- Workers may either be blamed or paid for something over which they had little control.
- For example, thousands of dollars can be spent on new equipment that would automatically improve workers’ performance.
If the incentive was established before the equipment was purchased, it would mean paying twice for the equipment: the direct cost of the equipment plus the cost of the higher remuneration to the workers. Any changes in technology or measurement have the potential for a change in standard and can lead to distrust if not handled properly.
Converting standards into pay. If no historical performance data exists for making sound pay decisions, you may want to do the work yourself—or ask others you trust to do it. An alternative is to hire a temporary crew at a highly elevated piece rate, with the express purpose of establishing standards.
In no case should the people who will eventually do the work, or someone who has a vested interest in the results (e.g., foreman with relatives in the crew), perform the trial. When farmers ask employees to work first on an hourly basis until the standard is set, workers may perform at a reduced level (while sometimes making it look as if they are struggling or working very hard).
Employees realize high performance during the trial will result in lower wages once the piece rate is fixed. Once standards are set, a farmer may lower the requirements but never make them harder. A vegetable grower underestimated worker performance. When the crew workers earned much more than the farmer expected, he lowered the piece rate.
The farmer lost credibility, worker morale fell sharply, and many left for other jobs. Step No.5. Protect workers from negative consequences Employees have a number of reservations related to the use of incentives. These include such things as fear of job loss, unfair pay, and rate reductions.
Provide a fair wage. Tell employees how much they are earning. Maintain fair standards. Hire fewer workers for longer periods. Protect senior workers. Provide timely performance feedback. Be sensitive to physical demands. Encourage workers to take rest breaks. Provide a safe environment. Avoid chance incentives.
Provide a fair wage. Workers are more likely to feel incentives are an excuse for low wages when they do not receive a fair base wage to begin with. They see incentives as either requiring unachievable goals in order to make a competitive wage, or only partially under their control.
- In contrast, when added to a generous base wage, incentives may be quite small and still be well received.
- Workers may look at them more as casual incentives ; they provide positive feedback and a feeling of belonging to a team.
- If incentives are not proportional to the amount of work involved, however, they are unlikely to provide the intended motivation.
Sidebar 8-3: Do piece-rate workers leave after making a wage goal for the day? Some farmers resist increasing incentive pay levels when compensating seasonal crew workers. They have hypothesized that workers have a certain earnings goal for each day and that once this goal is achieved, workers will go home.
Economists would explain this phenomenon as the income effect : increases in income allow those in the work force to take more time for leisure activities. But economists also speak of the substitution effect : the greater the wages, the more a worker forfeits by engaging in leisure time. A study in numerous crops showed that fewer than three percent of crew workers out of more than 440 left work after reaching a wage goal for the day.
About 11 percent of the respondents had at some time left earlier in the day, but the reasons given were (1) getting overly hot or tired or (2) not making a sufficient wage (i.e., low wages or not enough to pick). In either case, these workers were generally willing to stay longer if the earning opportunities were greater.
Workers need to maximize earning opportunities when they can be fully employed. Leisure could come later, during “down time.” 13 Tell employees how much they are earning. Cucumber pickers at one California farm did not find out what the piece rate was until the end of each day when they got paid-which was strictly on a per bucket basis.
A worker thinning peaches did not know how much he was earning per tree. In a third example, workers in Voronezh, Russia, who were putting boxes together for packing fruit, did not know how much they would get paid per box until the end of the month. In each of these cases, the farmer, the farm labor contractor, and the enterprise manager respectively explained, “Our workers trust us.” It became obvious, however, that the more buckets picked by the cucumber crew, the more trees thinned, or boxes built, the less they were going to get paid per unit.
One of the workers in the thinning crew expressed frustration at not knowing what the piece rate was and pointing to the end of the long row said, “If I knew how much I was getting paid per tree, I would have already finished the row and would be on my way back.” Maintain fair standards. Even after a piece rate or other incentive standard is fixed, workers may be hesitant to show farmers their full performance potential.
A call from a grower will best illustrate what I mean. He expressed the frustration that his employees were earning too much, “I have been thinking of reducing what I pay per grapevine from 32 cents per vine to 28,” he explained. I explained to the grower that the piece rate should not be diminished, that half his crew was apt to leave-the better half-and the other half would never trust him again.
“I was just putting you to the test,” the grower retorted. “I reduced the piece rate last week, and half the crew already left,” Crew members sometimes exert pressure on overly productive coworkers to have them slow down. They fear standards will be increased (i.e., they will have to put in more effort to make the same amount) either now or in future years.
A worker described how on a previous job he had been offered $1 per box of apricots picked. When he picked 100 boxes for the day within a few hours the rate was suddenly changed to 50 cents per box. Another worker explained, “If we are making too much on piece rate we are told to also weed, and that reduces our earnings.” 14 At a large orchard operation, top management was mistakenly focusing on average earnings per hour (by translating piece rate costs into hourly wages).
- Instead, they needed to focus on cost per acre or cost per job,
- When piece-rate paid workers made what to top management seemed like overly high wages, their pay rate was reduced with disastrous results: the best employees left, and trust was destroyed for those who remained.
- In order to counteract management’s tendency to lower the piece rate, a clever production manager formed crews where high earning workers were balanced out with slow ones.
This kept top management satisfied (because the average cost per hour was not too high) and yet allowed fast workers to earn more with less fear of having their wages cut.15 This practice, of course, does not solve the real problem, nor does it entirely overcome the disincentive to faster, more effective work.
For instance, this production manager may not want to use a practical test to improve the number of superior crew workers because of the wrongful dependence on costs per hour as a productivity gauge. It just wouldn’t look good to his supervisors if workers started earning more. The changes in standard may not be blatant.
For instance, when hourly paid crews get a cost-of-living raise, farmers may reason piece-rate paid crews do not need one as they are already earning double the wages. Without the raise, the premium for effort given to piece-rate paid workers is thus reduced.
Yet those on piece rate exert considerably more effort, as can be attested by anyone who has seen piece-rate paid pickers running through the field as they carry lugs or buckets of fruits or vegetables. The design of the incentive may be poor, also. For instance, one nursery grower gave employees an incentive for achieving a percentage of improved productivity over previous performance, and noted that employees “reached an expected threshold and there was no further change” after that.
The more workers improved, the harder it would be to surpass previous performance levels and gain an incentive reward. This employer dropped his incentive program. I wonder if performance reverted to a lower level, too. To conclude this set of examples with a more positive one, a prominent California vineyard operator called in frustration: “We have an employee who is earning $45 per hour by the piece! We must be doing something wrong!” Like the other farmer, they wanted to cut piece rates, but fortunately these growers called before making the change.
- I was able to explain that $45 per hour for the best employee was not out of line to what the research indicated.
- The best farm worker in a crew was capable of four to eight times the performance of the worst.
- I congratulated this farm enterprise, they had achieved trust from the workers! Sometimes farmers get paid less for their commodities.
When producers are forced to cut incentive wages in order to stay in business, they are likely to lose workers’ trust. Part of an effective labor management policy is to carry over farm income to protect workers’ future earnings. This will help balance out some of the rough spots so inherent in agriculture.
Some jobs require extra effort while others mean extra time (e.g., time spent improving quality). Incentives should compensate employees for the extra amount of time required to accomplish a job. For instance, if employees spend about half an hour more per milking shift to improve milk quality, the incentive should pay more than the half hour per shift the dairy farmer would have had to pay on an hourly basis.
Hire fewer workers for longer periods. Workers are less likely to slow down when they realize there is plenty of work to do. When time frames are not critical, it is often preferable to hire fewer, better-qualified people to do the job. You can manage to save money while providing a longer season and higher pay rates for employees.
- In agriculture, there is often little continuity in crews from one year to the next.
- While normally this presents a training challenge for growers, here it is an advantage.
- The farmer introducing an incentive pay system is free to set a crew size small enough to have plenty of work for the season.
- Farmers will want to work toward reducing seasonal turnover, and keep some of these excellent employees.
Producers who hire year-round workers, on the other hand, can have a policy of reducing their work force by attrition rather than by terminations. Protect senior workers. Farm employers may, through a careful selection process, avoid hiring employees who cannot perform the job.
- Those who employ workers without first testing them may want to encourage the most productive workers to come back each season.
- Farmers who have poor performers in their staff may wish to deal with this issue before introducing an incentive pay program.
- Sooner or later farmers need to deal with long time employees who are no longer in their prime.
Many farmers rightfully feel a sense of responsibility for these workers and often find less strenuous tasks for them. For instance, some growers employ older workers on an hourly basis to sort or check for fruit missed during the harvest. It is not uncommon for senior workers to outdo younger ones, of course, and assumptions about worker capabilities based on age are often unfounded.
- Provide timely performance feedback.
- Effective performance appraisal and communication is critical.
- For a worker paid on a piece rate, being sent back to redo a job as a result of poor quality means reduced earnings.
- Supervisors need to provide effective training and appraise worker performance in a timely fashion.
Farmers who have workers earn the right to work on an incentive pay crew (see Sidebar 8-2) by showing complete understanding of quality issues ahead of time, are likely to end up with fewer miscommunications with their employees. The simple act of making a list of criteria that are important to you and sharing those with workers will go a long way towards improved quality.
Taking the next step, of sharing with employees how well they are doing, can cement good habits. It also helps to provide samples of what is considered good quality work. For instance, one can provide a color-coded chart to illustrate minimum or maximum color requirements, or what a completed job should look like.
Be sensitive to physical demands. The physical demands of piece-rate paid work are such that workers need to work fewer hours than when paid by the hour, 16 or risk health problems. This is especially so with more physically demanding jobs in the summer heat.
Generally, the maximum workers can perform when paid by the piece is seven to eight hours. It is important to provide plenty of cold water and have it sufficiently close to the work being performed so workers will drink it. It may be necessary to provide worker training on the importance of drinking sufficient water.
Encouraging workers to drink early (before they become thirsty) and at frequent intervals may reduce body fatigue.17 Sometimes farm employers are pressured to get crops in but need to resist pressuring workers into staying longer. Some farmers have been effective in getting employees to stay when rain threatens to destroy a crop.
- They have done so by raising the piece rate substantially (which works fine in this case, as the workers will get the next day off and can rest).
- In some cases, an alternative would be to use more than one shift or additional workers.
- Encourage workers to take rest breaks.
- One disadvantage of piece-rate pay is that most employees forego their breaks.18 Making sure employees take their breaks is likely to reduce injuries and mistakes as well as increase worker preference for piece-rate paid work.
While those who perform hourly paid tasks take breaks on the farmer’s time, those on piece rate would have to do so on their own time. One way to encourage employees to take breaks when paid by the piece is to bring warm bread or cold sodas out to the crews.
Even more effective, is to insist that workers take a rest and pay them for the break time, either on an hourly basis or as a proportion of their piece-rate paid earnings. Provide a safe environment. The hard pace of piece rate may increase back or other work-related injuries.19 Farmers should consider ergonomic measures that facilitate, to the greatest extent possible, a work environment free of injury and illness.
Some suggest worker pace should be limited to protect workers from injury. Unfortunately, as we said when discussing this issue as it related to quality, limiting the total performance of workers would only be effective on a worker-by-worker basis, as optimum pace varies among employees.
- Injuries at the beginning of the season when workers may have had long periods of inactivity need to be guarded against, also.
- Employers may want to go to an occupational medicine facility to design an appropriate warmup or stretching exercise program for workers.
- Effective employee selection, training, and supervision can also do much to reduce injuries.
Avoid chance incentives. Chance incentives use luck (e.g., a chance at winning a TV or trip) to reward specific worker behaviors or results. Often those who are poor are especially attracted to gambling, hoping for things they are unlikely to achieve unless they get lucky.
- Employers who use chance incentives are gambling for the employee.
- In the short run, some chance incentive programs may produce the specific behaviors or results employers are looking for.
- But how appropriate—or to use a stronger word, how ethical—is the use of such chance incentives? Key questions farmers might ask themselves before implementing a chance incentive are: Is it fair to each worker? Who benefits from the incentive? Is the incentive being offered because paying each worker would cost too much? Or because what each worker would get would seem too little? Are all workers rewarded for their work efforts? Step No.6.
Improve communications To improve communication with and between employees:
Build positive interpersonal relations. Explain the program. Prepare a bargaining style. Provide feedback. Be open for suggestions.
Build positive interpersonal relations. Positive interpersonal relations between management and employees, as well as among employees, are a must before installing a successful incentive pay program. Incentives often add some tension and stress, especially at first, before results showing success are clear.
Added demands for positive two-way communication, feedback, and teamwork will increase. If interpersonal conflicts already exist, they should be worked out first (see Chapter 13), rather than hoping they will dissipate after the incentive program is established. Explain the program. A simple program will help build trust.
At minimum, all workers need to know what is expected of them and how their performance will translate into pay. It helps when the incentive plan is presented to workers for review and comments before implementation. Workers might spot not so obvious shortcomings or obstacles, and they are more likely to accept the performance challenge when they are involved (see Chapter 10).
- Better yet, is to involve workers in the design of the incentive pay program from the outset.
- If an expectation is set that employees can easily make the top incentive goal (e.g., for improving quality), the incentive may act as a demotivator.
- Instead, farmers should encourage employees to try their best and begin by shooting for the lowest level.
If the accomplishment exceeds the workers’ expectations, all the better. Prepare a bargaining style. Some negotiation on pay rates may be traditional. In seasonal agriculture some growers begin with lower pay than what they feel is fair to the workers, knowing that tradition demands they raise wages throughout the season.
Others prefer to let workers know they do not want to play rate-setting games. Still others set a fair wage along with a healthy end-of-season bonus that discourages employees from leaving or threatening to leave in mid season. When a grape grower announced he was paying $0.30 per vine, crew members protested.
They could not afford to work for this small amount, they argued. It appeared workers would refuse to work. The farmer stood cool and firm, and soon the workers smiled and said the wage was just fine, in fact, a cent better than the previous year. A grower offered pruners $0.28 per grapevine.
- Workers adamantly refused to work for this wage.
- The farmer then labeled each row and offered the same crew $22.40 per row instead.
- The pruners gladly accepted.
- This farmer had just multiplied the 80 vines in the row by $0.28 to end up with the identical final price per vine.
- With this approach, however, a farmer may be gaining short-term success at the expense of future trust.
Another grower encountered stiff resistance from crew members after announcing the pay rate. They pointed out the neighbor’s higher wages. The farmer aggressively told workers they could look for work elsewhere if they did not like the rates. This situation ended up in a labor dispute, as workers felt they had been constructively discharged (i.e., forced to quit) in order to save face.
Instead, this farmer could have calmly explained how he arrived at the pay level and told employees he hoped they would be able to work for him at this wage. Perhaps the neighbor pays more but keeps employees for a shorter season or does not provide as many benefits. While listening to workers may work best in one case, it may falsely encourage and disappoint them in another.
Not everyone can handle the high pressures of negotiating with a crew. I would prefer to post wages where they can be readily seen by all applicants. The farm employer avoids (1) surprising workers, (2) haggling with the crew, or (3) taking a chance on a confrontation that may get ugly and out of hand.
- A farmer who expects not to have to haggle over wages needs to be sure that the wages she offers are fair to begin with.
- Provide feedback.
- Producers need to provide frequent feedback to employees, regardless of the usual pay interval.
- For instance, crew workers may be paid on a weekly basis but receive daily performance feedback.
Feedback may be given in person or posted to safeguard worker anonymity. An effective method of providing meaningful feedback is through a separate paycheck, or “adder,” 20 for the incentive. For greatest effectiveness, adders should be given at a different date than the usual payday.
- A separate check reminds the recipient that the extra compensation is for a specific purpose (e.g., such as a wet winter or harvest months involving long hours) and will last only as long as the condition merits.
- Be open for suggestions.
- After the incentive is in place, workers may not be pleased with it.
A dairy farmer who employed five workers was approached by two of them. They asked for a raise and the elimination of the incentive pay program set up a year earlier. The producer could have asked the workers for their opinion or even put the issue to a vote.
- The positive side of such open democracy is potentially greater ownership of the incentive program by employees—if they voted in favor of keeping it.
- If voted down, the farmer could hardly say, “Yes, you voted to eliminate the incentive program, but I was just checking, and we will still keep it.” The higher the benefits derived from the incentive program, the more likely the question put to the workers should be, “What can we do to improve the incentive pay system?” In the end, the dairy farmer did not put the program to a vote and ended up with a successful program, with workers earning $300 a month in incentives.21 Step No.7.
Periodically review the program Record keeping and statistical analysis are critical to determine the success of the incentive pay program. Good controls are crucial so incentive pay results can be isolated and correctly attributed to the pay system. If a farmer introduces other changes simultaneously, she may never know the impact of the incentive program.
There are a number of statistical tools that may be used to analyze results. Your computer spreadsheet may already allow you easy access to these tools. You may want to consult with a statistician, labor specialist, farm advisor or county agent on what statistical tools to use. Results may indicate directions for change or improvement.
Once the program is in use, changes must involve workers in order to maintain the trust that is so essential to the success of an incentive pay program. Farmers can benefit from keeping records even if they are not providing incentives. These records can help establish base lines essential for establishing standards for future performance.
- In some cases, incentive programs are dropped too soon, without giving the systems sufficient time to work.
- Several farmers who have established successful incentive programs have mentioned the need for patience—sometimes having to wait over half a year for the program to function well.
- Summary Incentive pay has the potential to increase worker productivity if properly designed and maintained.
Even though employees know that attention to detail, increased productivity, or suggestions may bring about rewards, casual incentives are characterized by the inexact or unexpected timing and amount of the reward. Farmers’ structured incentives are most likely to succeed if they have (1) accurately established standards; (2) clearly linked superior performance with pay or a valued reward; and (3) carefully considered what type of performance the incentive stimulates. 1. Billikopf, G.E. (1992). Establishing and Trouble Shooting Incentive Pay Programs (Chapter 83) (pp.793-802). Large Dairy Herd Management, (Van Horn, H.H. & Wilcox, Editors), Champaign, IL: American Dairy Science Association. 2. Billikopf, G.E. (1995, October). APMP Study on Incentive Pay. Quote from American Nurseryman magazine portion of study. 3. Brown, W.A. (1994, January) The Executive Program for Agricultural Producers (TEPAP), Texas A&M University, Austin, Texas. 4. Billikopf, G.E. (1996, November-December) APMP Incentive-Pay Study Report and Crew workers split between hourly and piece-rate pay (Vol.50-6) (pp.5-8). California Agriculture. 5. Billikopf, G.E. (1996, November-December). Crew Workers Split Between Hourly and Piece-Rate Pay (Vol.50-6) (pp.5-8). California Agriculture. 6. Billikopf, G.E., & Norton, M.V. (1992, September-October). Pay Method Affects Vineyard Pruner Performance (Vol.46-5) (pp.12-13). California Agriculture. 7. Milkovich, G.T., & Newman, J.M. (1999). Compensation (6th ed.) (pp.317-318). Boston: Irwin/McGraw-Hill. 8. Donaldson, G., & Lorsch J.W. (1984). Decision Making at the Top. New York: Basic Books. In Lax, D.A., & Sebenius, K.S. (1993). Interests: The Measure of Negotiation (2nd ed.) (p.131). Negotiation: Readings, Exercises, and Cases by Lewicki, R.J., Litterer, J.A., Saunders, D.M., & Minton, J.M. 9. See Billikopf, G.E., & Norton, M.V. (1992, September-October). Pay Method Affects Vineyard Pruner Performance (Vol.46-5) (pp.12-13). California Agriculture., and Billikopf, G.E., & Kissler, J. (1988). Hourly Versus Piece-Rate Paid Vineyard Pruners (pp.13-14). 10. Billikopf, G.E., & Norton, M.V. (1992, September-October). Pay Method Affects Vineyard Pruner Performance (Vol.46-5) (pp.12-13). California Agriculture., and Billikopf, G.E., & Kissler, J. (1988). Hourly Versus Piece-Rate Paid Vineyard Pruners (pp.13-14). 11. Saldana, A. (1998, April 14). Personal communication. Naumes Orchard Divisions. Modesto, CA. 12. Collar, C. (1991, February 5) Incentives for Reducing Calf Mortality. Employee Incentive Pay in Dairies conference. University of California. Modesto, CA. 13. Billikopf, G.E. (1995, January-February). High piece-rate wages do not reduce hours worked (Vol.49-1) (pp.17-18) California Agriculture, 14. Billikopf, G.E. (1996, November-December). Crew workers split between hourly and piece-rate pay (Vol.50-6) (pp.5-8). California Agriculture. 15. Saldana, A. (1998, April 14). Personal communication. Naumes Orchard Divisions. Modesto, CA. 16. Billikopf, G.E. (1995, January-February). High piece-rate wages do not reduce hours worked (Vol.49-1) (pp.17-18) California Agriculture, 17. You may want to review the American College of Sports Medicine Position Stand on “Exercise And Fluid Replacement.” Among the suggestions offered there, for instance, include the idea of keeping water cold and “flavored to enhance palatability and promote fluid replacement.” Make sure to consult with your physician, however. 18. Billikopf, G.E. (1996, November-December). Crew workers split between hourly and piece-rate pay (Vol.50-6) (pp.5-8). California Agriculture. 19. Sandoval, L. (1990) Personal communication. Agricultural Workers’ Health Center. 20. Belcher, D.W. (1974). Compensation Administration. Englewood Cliffs, N.J.: Prentice-Hall. 21. Wagner, R. (1991, February 5). Dairy Farmer Experiences With Incentives. Employee Incentive Pay in Dairies conference. University of California. Modesto, CA.
What is incentivized advertising example?
What are incentivized ads? – Incentivized ads are marketing tools that offer users a reward or incentive in exchange for completing an action. They often appear on shopping or gaming apps. And they’re sometimes referred to as sponsored, rewarded or value exchange advertising.
- Incentived ads can result in direct conversions for advertisers.
- And statistics show that users are over 25% more likely to convert when rewarded this way.
- Examples of incentivized ads include percentage discounts, upgrades, or even virtual currency in exchange for actions like installing an app.
- Most often these will run on a CPI basis, which can be cheaper than non-incentivized ads app installs.
Incentivized advertising began in the gaming vertical. And it’s a substantial marketing activity that makes up around 90% of gaming ads. Many advertisers favor using high-quality incentivized ads to drive traffic and gain interest in an app. Gaming, music streaming, social media and retailing are some of the most popular areas for incentivized advertising.
What is the difference between incentivized and penalized?
Penalties and Incentives in Outsourcing Relationships Punishments and rewards modify behavior in different ways. Penalties tend to stop undesired behavior, while incentives encourage and reward positive behavior. Smart executives recognize this distinction when defining objectives and performance measures for individuals.
If basic expectations aren’t met, consequences are suffered. Conversely, rewards such as bonuses, stock options, and promotions motivate excellence and achievement. Similar principles apply at the organizational level when a business contracts with a service provider. Penalties for failing to meet minimum standards must be sufficiently painful and immediate to prevent complacency and sloppy work, while incentives must be attractive enough to motivate additional investments of time, money and effort.
Penalties The goal of penalties in outsourcing agreements should not be to punish, to pay less for poor service, or to recover costs incurred as a result of problems. Rather, penalties should prevent problems from occurring in the first place and, failing that, should produce changes that fix the problems and increase the probability of repeatable successes in the future.
Penalties must be substantial enough to exceed the administrative cost of processing them, and should increase with each repeat occurrence, up to a specified maximum. Penalties are typically capped at a percentage – as high as 15 percent – of the monthly invoice. Repeated failure to meet service targets could permit the client organization to terminate the contract for material breach.
Penalties should be paid in the month after the failures occurred – and not tallied for reconciliation at year end. Otherwise the direct connection between poor performance and the penalty is lost, as is the sense of urgency to focus attention on the cause of the problem and corrective action.
Services are usually weighted according to their relative importance, and penalties can be calculated as a function of that weighting and the monthly service fee. In some instances, penalties may focus on trends, so that a downward trend over several months gets penalized, rather than any one particular anomaly. If staff continuity is a priority, vendor staff turnover can be used to trigger penalties, whether that turnover is caused by reassignment or by vendor staff leaving the company. Penalties can be tied to missed critical outputs that are key to business success.
To effectively use penalties to motivate vendors, clients must define business priorities and focus measurable penalties only on those things that really matter. In other words, each miss in the specific critical service areas that affect business priorities should produce a deeply felt impact.
Put differently, given a penalty “budget” of 15 percent of the contract price, knowing where to “invest” that 15 percent is the magic formula. If a vendor faces a 10 percent penalty for missing a key check run, for example, then considerable energy and enthusiasm will be directed to ensuring that target is never missed.
Penalties tied to outages must be explicitly defined and scaled to deliver bigger hits for longer outages. For example, if acceptable outages are set at a maximum 30 minutes per month, the client must specify that the penalty for 400 minutes is greater than for 31 minutes – if not, the penalties may well be identical.
- The difference in impact between one 30-minute outage and 30 one-minute outages must also be considered and specified.
- A sliding scale of penalties can be an effective tool for managing application availability.
- Penalties can be tied to number of users impacted, number of sites impacted, number of applications out at one time, duration of the outage (e.g., up to 2 hours, 2 to 4 hours, more than 4 hours), first or second time this month, or this quarter, and so forth.
Penalties can be based on a tally of “points” drawn from the sliding scale. For example, x points cost y dollars in month one. If the failure repeats in month two, the penalty multiplies. If the vendor tracks performance and penalties, then the client must invest time in this activity as well.
Here again the key is to focus on priorities: the most important services carry the most severe penalties, and should receive the most attention. That said, not monitoring other services does not excuse the vendor from meeting targets in those areas. Incentives Incentives can enhance motivation and accountability (and thus results), and foster healthy competition, particularly in a multi-vendor environment.
Incentives should motivate positive behavior by recognizing and rewarding achievements that contribute value to the organization. The specifics of any formal incentive program should be clearly documented and communicated to all who can potentially contribute and benefit.
- A well-conceived incentive program is based on mutually defined goals and objectives that are established and reviewed annually, and that go beyond (though aligned with) the attainment of contracted service levels.
- Generally speaking, vendors should be rewarded for identifying cost saving opportunities, implementing initiatives that contribute to business success, or improving services that contribute to business success.
Incentives tied only to the attainment of service levels are generally a bad idea – why should clients pay a bonus for services they’re already paying to receive? Moreover, exceeding established service level targets generally adds no value to the client.
Achievement bonuses are typically one-time payments for reaching certain milestones. These may be tied to earlier-than-expected completion dates, higher-than-committed critical service levels (only if this overachievement adds additional value to the client), or better-than-expected throughput. Comparative rankings, whereby top performers receive bonus payments, can encourage continuous improvement and innovation when multiple providers for the same services are involved.
Characteristic of incentive programs include:
Key personnel for both the vendor and client organizations have individual incentives related directly to organizational incentives, which in turn are aligned with business goals and objectivesPayments made annually to individuals who have made a significant contribution to the outsourced account – based on nominations from peers, management from both sides, or other agreed upon criteriaPayments based on the mutual attainment of goals by vendor and client where only combined attainment results in payment to either party- thereby motivating both to work together more effectively to realize goalsGain-sharing, where the vendor receives a portion of any additional savings generated from, for example, reducing costs of raw materials, implementing new technologies, or recommending and implementing improvements in operations. Gain-sharing splits typically range from 50/50 to 75//25 in favor of the client and are generally subject to time limits
Savvy organizations recognize that penalties and incentives are powerful tools that, used wisely, can build effective, successful, and innovative outsourcing deals. For management, the key is to apply these tools in a fair and consistent manner. Unenforced penalties lose their value, erode management credibility, and can undermine the entire relationship.
- Similarly, incentives must be honored when the goals are achieved.
- Unrewarded effort is unlikely to be repeated, and unmet promises may foster resentment and a decline in future performance – which is worse than offering nothing at all.
- Both client and vendor should seek to marshall resources to identify and correct problems that are causing penalties.
And both organizations should want their own and their partner’s team recognized and rewarded for their achievements. Dawn Willis is a Compass executive consultant based in Canada. Copyright © 2004 IDG Communications, Inc. : Penalties and Incentives in Outsourcing Relationships