Companies often throw money at employees and expect huge returns on their investment. When employee incentive programs don't work, it's usually because they were improperly designed.

Companies can lose money if they reward employees simply for meeting job expectations. And employee morale can deteriorate if performance standards are set too high.

Effective employee incentive programs have the following characteristics:

• Clearly stated objectives

  After defining organizational goals, management needs to communicate the main business objectives in simple terms to all employees.

• Interlocking pieces

  It's not unusual to implement multiple incentive programs to meet several business needs. Although programs are separate and distinct, they should "fit together" like pieces of a puzzle to make a whole picture.

• Desired job behaviors

  The specific job behaviors required to meet organizational objectives need to be communicated to employees.

• Reliable measurement

  Employees do not respond favorably to reward and recognition programs that do not adequately and reliably measure job performance outcomes.

• Reasonable performance standards

  Different performance levels (e.g., does not achieve standard, achieves standard, exceeds standard), which need to be well-defined, should be based on a thorough analysis of historical performance data. Standards established for rewarding employees work best if they are realistic but challenging.

• Motivating rewards

  Management should pay particular attention to the type and monetary value of employee incentives. Studies have shown that employees improve their performance significantly if they receive formal recognition of their achievements. Rewards do not need to be expensive.

• Defined guidelines

  Specific guidelines should be developed to ensure that recognition programs run smoothly and all employees are treated fairly.

• Monthly or quarterly performance feedback

  It's important to communicate employee and organizational progress every month or quarter. Departmental and divisional results can be posted on a bulletin board or communicated in an email. Monthly meetings are effective for providing timely performance feedback to employees.

• Focus on employee behaviors required to meet business objectives.
• Involve reliable measurement of job performance outcomes.
• Include realistic, but challenging, performance standards.
• Provide motivating, cost-effective rewards.

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