Operations and Management: Don’t Drop Those Incentives Yet

A few years ago, catalogers and dot-coms competed not only for sales but also for employees. Some Internet-only firms offered outrageous signing bonuses and stock-based compensation packages to lure workers away from catalogers, not to mention other perks such as weekly visits from masseurs.

But the dot-com crash and the lingering recession have added to the pool of available workers. According to the Bureau of Labor Statistics, the national unemployment average in 2000 was 4.0%; in August 2002 it was 5.7%.

As a result, some catalogers believe that they no longer need to offer incentives to gain new employees or to keep workers from leaving. But human-resources professionals insist that they’re wrong.

To attract quality workers, companies need to provide incentives to employees regardless of the economy, says Terre Simpson, president of New York-based executive search firm Simpson & Associates. “Offering incentives to employees is pretty standard nowadays,” she says. “As a matter of fact, employees have come to expect it.”

The fact is, there will always be a competitor somewhere willing to woo away your best performers. What’s more, even the most conscientious, self-driven workers burn out and need recognition. And while unemployment may have risen in certain parts of the country, in others — particularly the rural areas in which most distribution facilities are located — qualified help remains tough to find.

“We try to be the employer of choice in the community,” says Phyllis Irish, manager of recruitment for Dodgeville, WI-based Lands’ End. During the first three quarters of the year, the apparel and home goods catalog employs more than 7,000 workers. But for the fourth quarter, when it does 40% of its business, Lands’ End needs to hire more than 2,000 seasonal employees. And that’s no easy task, even in the current economy, given that Lands’ End’s distribution facilities are located in rural Wisconsin.

To that end, Lands’ End works hard to keep workers happy — in part by giving out spot cash awards of up to $2,000 for a job well done. The cataloger also recognizes employees’ birthdays and anniversaries in company newsletters. Such tactics not only keep employees happy and productive, but they also motivate them to refer friends and family to work for the company. Referrals account for about 55% of Lands’ End’s applications, although Irish won’t disclose the percentage of hires. But she says such referrals are “a better quality of candidate.”

Size doesn’t matter

While the $1.56 billion Lands’ End has more financial resources than most catalogers, smaller companies have also benefited from sweetening the pot for workers. South River Distribution, the fulfillment arm of the Museum of Modern Art (MoMA), began offering employees incentives four years ago. Since then, the South River, NJ-based facility has reduced staff turnover by 40%, says director of fulfillment operations Chuck Inman.

South River frequently offers cash prizes to the warehouse employees picking or packing the most orders, based on wherever speed or efficiency is needed most during crunch times. For instance, Inman says, if all the orders are picked, there may be a bottleneck at the packing station. A quick contest can help get the orders packed in no time.

During peak periods, management may throw workers a pizza party if they fill the UPS truck within a given time frame. Periodically, South River also holds drawings to win televisions or DVD players. And at least four times a year, workers are treated to a cookout — which is served to them by management. Inman says that these incentives cost the company just a few thousand dollars — a bargain compared with the cost of recruiting and training new hires.

For South River, which employs 32 full-time staffers and ramps up to about 55 during the fourth quarter, the program has been so successful that seasonal employees frequently become full-time staffers, Inman says.

Eyes on the right prize

Omaha, NE-based Omaha Steaks hires more than 1,000 seasonal workers for November and December, so incentives keep the food gifts cataloger competitive, says director of employee services Jim Bohan. Omaha Steaks offers cash bonuses for returning seasonal workers, it also offers seasonal employees discounts on its products for a year and awards prizes every day during December. The mailer does not offer such perks to full-time staffers, however.

Bohan has found that offering several types of gifts and prizes works best. “For as many different kinds of workers that you have, that’s how many kinds of incentives you should offer,” he says. “Variety is important.”

Though the experts contacted for this story agree that cash bonues and incentives are not a cure-all, they are an important piece of the puzzle. As South River’s Inman says, “Sometimes that extra buck gets their attention.”

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