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Defining Terms of Employee Engagement

Terms of Employee Engagement

I’m sometimes invited to sit with organisations to support them designing their ‘engagement’ programs. What’s interesting is that each organisation seems to speak in a different language – that is, in their terms of employee engagement.

For instance, I was talking to a client last week who was saying ‘incentives’, but what they really meant was ‘at-risk compensation’. There are many mechanisms we use to deliver engagement – like customer engagement or employee engagement.

Now I’m not saying that my definitions are more right than others, but it would help if we are all singing from the one song sheet. Here are a few definitions.

Compensation: This is the financial and benefits package received by employees for showing up.

At-Risk Compensation: There is a plethora of these, sales commissions, and bonuses, sometimes called incentives. Incentives are the payments used to incite action or stimulate greater productivity. These are financial payments to employees for achieving a specific set of criteria.

Long Term Incentive Schemes: These often relate to phantom options or share options schemes, there is usually a qualifying period and obviously any financial gain is based on business performance.

RedBalloon’s corporate team does not work in any of the above areas – there are compensation specialists who construct such packages… but let’s keep going with the definitions and cover the ones we definitely do support.

Recognition: This may or may not have a gift associated with it. A formal recognition program is about noticing people’s contributions and thanking them for it authentically. One of the best examples of a recognition program is the Qantas eXcel program.

Awards: This is a mark of recognition given to honour an achievement. It could be unexpected and is never guaranteed. It is used mostly for thanking people in a more public forum.

Rewards: Is an item given in recognition of service, effort or achievement – here we are talking about the tangible benefit received… eg an experience voucher

Incentives: can be grouped under the definition of the thing that motivates one to take action. There is a clear objective set, the carrot is named and people are able to ‘earn’ gifts or prizes based on the achievement of those objectives – See the APHS and Telstra case studies

Loyalty: This is the hardest one to determine and often miss used. By definition, it means that a program that makes people more attached to the brand or organisation. The reality is that there are very few true loyalty programs. We run many Length of Service programs – but really these are recognition programs, people are unlikely to stay longer with an organisation because of these programs.

Improving employee engagement does not come from the successful implementation of just one of these mechanisms – it is a mixing pot of what will drive the best results.

I’ve blogged many times on why people’s salary and employment package is not enough alone to motivate people.

If you don’t capture their hearts and minds, no amount of money will keep them long term.

Incentivising people and clients as frequently as possible is important. And yes, incentivise isn’t a real word! I’ll leave that definition to you.

In fact, Dan Pink recently outlined that there was new research to show the financial incentives can often reduce productivity, because people are so focused on the dollars that they are no longer prepared to take risks or be creative.

Here’s his presentation from the TED conference in July 2009.


For more from Dan, I recommend his book below:

Reader Interactions


  1. It was a book I read called punishment by rewards, ca?t remember the Author but in it I got the idea to just say thanks! Not say thanks for staying back late Because then they would think,†well he gave me flowers when I stayed back late last week, now if I stay back late for the next 2 weeks I wonder what I get… 2 bunches of flowers ? If they got 1 bunch of flowers or did?t get anything then they became disgruntled…. I experienced this.

    The book talked about the danger of not training people to look for rewards. I learned that rather than give some one a reward I would say, I” got you this to acknowledge how wonderful you are”. They would always ask what it was for and I would say, “just because I think your great”. By not tying it to any one specific thing they don’t then drop the ball on things that don’t get rewarded and only focus on doing the things that do.

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