The Pros and Cons of Incentive Programs for Spa Employees

Employee incentive programs can pack a punch in boosting productivity, morale and profits. But sometimes the outcome can seem more like a punch in the nose.

[Image: Getty Images][Image: Getty Images]Employee incentive programs can pack a punch in boosting productivity, morale and profits. But sometimes the outcome can seem more like a punch in the nose.

No good deed goes unpunished. That cynical old saying has held real-world meaning for many spa owners mired in the midst of employee incentive programs gone wrong. That’s unfortunate, because when properly planned and executed, incentive programs offer wonderful, business-boosting benefits. And it isn’t all about the bottom line. Incentives have the power to make your spa a happier place for staff, clients—and owners.

The more the shame, then, that many spa owners suffer from a “once bitten, twice shy” attitude when it comes to staff incentive programs. Having heard about their wonderful benefits, they gave it a shot, only to have hopeful enthusiasm give way to bitter disappointment. Results may have been anemic and discouraging. And some owners have found themselves with a real fiasco on their hands, in the form of lost funds and deflated staff morale.

Because in spite of the potential pluses that incentive programs offer, there’s a definite yang to that yin. A program that’s poorly planned or executed will not only fail; it can negatively impact the very business metrics it’s intended to boost. And in an avalanche of failure, all the indicators used to measure the program’s success can be sent sliding in the wrong direction.

WHAT COULD GO WRONG?

Employee incentive programs are always based on good intentions. You implement a program to increase your spa’s productivity, and boost employee morale and engagement. Your ultimate goal, of course, is to make your business more profitable. That’s the winwin of this strategy.

But a program gone wrong can:

• Promote unfriendly competition among your employees.

• Unfairly recognize some employees over others.

• Be perceived as patronizing or insulting.

• Fail to return the needed proportionate value to your business.

Angela Cortright, founder of Spa Gregorie’s with two locations in Southern California, speaks to the importance of fairness in a program. Take, for example, a plan that offers incentives based solely upon total sales figures or numbers of products retailed. This approach would give full-time employees an unfair advantage over part-time employees. “Your program must give everybody an equal chance to succeed,” Cortright emphasizes.

“Incentive programs can be tricky,” agrees Drew Allt, founder and president of Drew Patrick, a wellness center in Bay Shore, New York. Allt has observed problems develop due to a simple lack of thorough planning. “An example would be offering a reward to the esthetician who performs the highest number of microdermabrasion treatments—when there’s only one machine and multiple estheticians,” he says. Situations of this type can lead to frustrated employees and less-than-friendly competition, all of which create a tense and unpleasant atmosphere for both staff and clientele.

Leslie Lyon, president of Spas2b, which provides advanced spa business management education, warns of the potential for incentive programs to foster undesirable conduct in employees. “Some programs can encourage insincere staff behavior,” she notes. “Participants alter their practices or attitudes because they want to get the reward, or ‘win’ the competition. Often, the commitment to improve is short-lived, and behaviors revert to normal once the incentive period is over. So, no real long-term improvements or advancements are actually made.”

The primary lesson from experts is that implementing an incentive program takes considerable time and thought. Unfortunately, spa owners are already bogged down with hectic schedules. “They just don’t always have the time, much less the inclination, to really develop a program and ensure its success,” Lyon says. “So they throw together an incentive plan that ends up working against them, causing their staff to lose confidence in them.”

BIGGER ISN’T ALWAYS BETTER

Spa owners often find themselves involved with incentive programs that require far more time, money and effort than they deliver in value. (“We’ve been there, done that,” Cortright admits.) But manageable incentive programs that offer modest rewards are often the most successful. “Honestly, we often get as much traction from a $5 Starbucks gift card as we do from a bigger prize,” Cortright shares.

And incentive programs aren’t just about dollars and cents. In fact, the monetary value of the reward may be a secondary motivator. “I think it’s really as much about the recognition as anything else,” Cortright explains. “People want to be recognized for their efforts, for the work they do.”

Lisa Starr, a spa operations consultant with Wynne Business, couldn’t agree more. As a specialist in issues related to employee compensation and operations optimization, she cites the many studies showing that recognition is at least as important as monetary remuneration—if not more so. “Money is important, of course,” says Starr, “but finding a way to publicly reward and recognize performers who exceed benchmarks has to be included.” Conversely, calling a winning employee into a back office and tossing her a gift card won’t exactly maximize the benefits of your program.

For programs that do offer a high-value reward, Cortright recommends protecting yourself by setting a minimal performance threshold that employees must achieve to be in the running for the big prize. Be prepared, though, in the event that nobody meets that mark. “It’s important to provide a smaller reward in case no one reaches the threshold,” Cortright cautions. “Otherwise you risk losing participation or effort in future incentives.” Also, she adds, when a program ends, be ready with another one to keep up morale.

MONITOR, MEASURE AND TWEAK

“Incentive plans exist to drive behaviors,” reminds Starr. “Your regular compensation plan should also be designed to do this, but if it doesn’t create the desired effect, that’s when incentive plans become even more important.” To evaluate whether you’re in a position to try an incentive program, Starr recommends taking a hard look at your numbers.

“If total employee compensation for the spa, including support staff, taxes and benefits, is less than or around 55%, then you have a little wiggle room,” she says. “But if your expenses already exceed this amount, then there’s not much room for incentives.” And if you do implement a program, Starr recommends that the incentive not exceed more than 5% of direct employee compensation.

Once a program is underway, serious number crunching should continue, to evaluate its effectiveness. Lyon emphasizes the importance of looking at profits, as opposed to total sales. “If there are no profits evident, the program might be a no-win for the business—regardless of whether sales figures have been met,” she says. That said, numbers don’t necessarily paint a complete picture. Intangibles such as boosting awareness and modifying employee behavior can provide less measurable but nonetheless welcome business benefits.

It’s important to evaluate the effectiveness of employee incentive programs while they’re in progress so that if a program isn’t achieving the intended metrics, you can modify or even terminate it. Tracking the numbers is easy enough, but it’s crucial to monitor more than sales figures. Lyon advises owners to increase communications with clients during an incentive program. It’s human nature for employees to take shortcuts in their pursuit of a goal, and customers will likely notice, so place extra effort in monitoring customer satisfaction during a promotion.

Although healthy competition among employees is the foundation of a successful employee incentive program, that competition sometimes can morph into a decidedly unhealthy form. It’s prudent to stay alert for any indications that the competition among your staff is taking an undesirable bent. This might include anything from blatant squabbling to a subtly tense atmosphere to a decreased willingness among employees to help each other out. To avoid such scenarios, Allt reminds spa owners to ensure that incentive programs allow participants “equal access to clients, equipment and appointment book time.”

Given all the potential negatives, are employee incentive programs really worth the bother for spa owners? “Absolutely! You’re nuts if you don’t do it,” Cortright declares. With proper planning and execution, these plans are the gifts that keep on giving, delivering benefits that extend far beyond their end dates. They’re invaluable tools in fostering and reinforcing desirable behavior and productive habits.

Cortright offers a recent example from Spa Gregorie’s. “We initiated an incentive program for increasing email captures,” she explains. “Before the program, email captures had dwindled to less than 50%. During the program, email captures soared to between 70% and 80%. And even now, although the program ended some time ago, email capture rates remain in the 70%-plus range.”

–by Chris Delker

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