Employee incentives divide executive boards. Some swear by bonuses and target premiums, others have watched a badly designed incentive set a whole team against each other. Both are right. The effect depends on what is offered to whom, and for what.
In February 2023, Forbes asked 14 members of its Coaches Council how leaders of large companies should use incentives. I was one of them. Here are the 14 answers in my reading, written for executives in Swiss corporates and large SMEs in 2026.
You get what you measure. Reward revenue and you get revenue, often with collateral damage to morale and collaboration. One panellist would therefore only reward growth: Show me you developed, and I will pay for it. Both sides gain from that, and they gain for years.
What drives the head of sales leaves the engineer cold. Incentives work as a menu: Several offers of similar value, and each person picks. Better still, ask people directly what would motivate them. Leaders who do that get a team that feels taken seriously.
A panellist from advertising kept the team happy with incentives that fitted the work. The logic: Find out what tools someone needs to perform, then show appreciation. People who feel good about their job and trust their manager stay longer. I hear that in almost every coaching conversation about retention.
Organisational psychology describes the effect: Too many external rewards weaken internal motivation. People who expect a premium for every task stop acting on their own initiative. Incentive programmes have to protect intrinsic motivation. Recognition, flexibility, autonomy and meaningful work carry further than any bonus.
An incentive works when it fits what the person cares about and when it complements talent development, promotion and pay. As a substitute for any of those it rarely holds. I have watched a bonus try to make up for a promotion that did not happen. The person left anyway, six months later.
From tuition reimbursement to extra paid leave, the range is wide. What matters is the fit with the workforce and with what the company stands for. If hiring is the priority, reward referrals from employees. That improves recruitment and motivates at the same time.
Pay and promotion are often substitutes for purpose. Give everyone in the company a reason for their work and you hold the strongest incentive there is, at no extra cost. One panellist uses a three-year plan built on goal-setting theory for this. The format matters less than whether people understand the goal.
My contribution to the panel: An environment that supports engagement usually beats any incentive. That includes clear goals, room to grow, a culture without fear and recognition for contributions. Leaders can create a sense of direction that goes beyond the wish to earn a premium. I still work on exactly this with leadership teams.
Incentives used to make up for low pay demotivate and create stress. As an invitation to join a mission, they work. A total package built on measurable objectives everyone knows, drawn from a 360-degree scorecard, creates room for meaning. Money is part of it, usually the smaller part.
An incentive without a plan and without a link to company goals fizzles out or does harm. A thank-you from the CEO in front of the team often lasts longer than the premium on the payslip. Together they are the strongest combination.
Incentives steer behaviour, including the wrong kind. Reward individual deals and you get lone wolves. Reward retention and you get people who follow up. Before any programme, check which behaviour it will actually produce, seen from the person receiving it.
Two questions before any incentive: What is it for, and who is it for? A panellist from a luxury brand listed the goals in order: First, revive interest in a product that was not selling, second, break the routine, third, extra revenue. In that order. Most companies would start with revenue.
An incentive skewed toward certain teams creates dysfunction and resentment. In one Swiss industrial group I saw two divisions court the same customer because both were rewarded for it. Align incentives so that everyone wins when the team wins.
For predictable, routine or repetitive work, incentives help. That work can be measured and tolerates external motivation. For complex, deeply technical work they are weaker, because the people doing it mostly run on their own drive. A bonus for a head of research rarely achieves what autonomy achieves.
Three years on, I see two shifts in large Swiss companies. Variable pay is scrutinised more critically, and at the same time boards ask more often what keeps people who do not work primarily for money. Employee incentives are effective when the leader can explain what they stand for. Without that explanation, the premium stays a number on the payslip.
With leadership teams I replace the bonus question with a different one: "Which behaviour do we want to see in twelve months?" The incentive follows the answer.
Further reading on hofmann.coach: Leadership Coaching · Positive Leadership: Five tests · Shared leadership
Note: This page goes back to the Forbes Coaches Council expert panel "14 Tips For Using Incentives To Motivate Employees At Large Companies", published 1 February 2023. The commentary is mine.
Cristian Hofmann is an executive coach in Zurich and Schaffhausen (MAS Coaching & Supervision BSO, Forbes contributor). Over more than 20 years he has coached more than 1,500 leaders: CEOs, executive boards and leadership teams in Switzerland, with measurably agreed goals and, on request, pay-for-results. More about Cristian Hofmann.
This website uses cookies to ensure you get the best experience on our website. Learn more
