TWO YEARS AGO, Derek Carissimi took a look at his industry — health care — and began to think about programs that his hospital could use to attack the labor shortage problem that was endemic to the field.

The issue of employee retention was “very key,” said Carissimi, the vice president of human resources for St. Alphonsus Hospital in Boise, Idaho. “We are in a period of severe shortages in a lot of areas. We were looking for a creative, high profile, exciting way to cut [employee] turnover.”

His solution? An incentive program that lets employees earn points that they can then redeem for merchandise and travel. The program was instituted last April and, according to Carissimi, has helped the hospital to reduce its turnover rate by 20 percent.

Ready to Jump

The employee retention issue is not only an issue for industries with historically high turnover. Now that the sluggish U.S. economy seems to be picking up, many are predicting that employees, who have for the past several years hunkered down in their present positions, are ready to start jumping. “The pendulum is swinging the other way,” says John Dooney, a human resources manager for The Society for Human Resource Management, an association in Alexandria, Va. “It won't be as crazy as the late 90s, … but there will be a spike with all the pent-up demand.”

Considering the costs of hiring and training new employees, expect to see executives turn to “human capital management” programs that have been sitting on the back burner, Dooney says. One advantage of a point-based incentive program is that it gives an employee a tangible reason — his or her supply of points — for staying with a company.

“An employee may say to himself, ‘If I stay around another month. I can target a piece of merchandise,’” says Bill Moulder, vice president of sales for Maritz Incentives, St. Louis. “It may make him put off a decision on a different job opportunity.”

Positive Reinforcement

In the case of St. Alphonsus, a turnover rate of 14 percent has been lowered to 11 percent in the past year — a reduction that Carissimi attributes to the incentive program.

The points can be awarded by supervisors and by peers for reasons ranging from showing patients “extraordinary kindness” to performing “above and beyond.” In addition, employees can receive points for attending meetings or events, serving on committees, or even donating blood. “My strategy has been to be as expansive as I can,” Carissimi says.

The program, which is administered by Hinda Incentives in Chicago, is completely paperless. If someone wants to award points, he or she accesses the hospital's extensive computer network and logs onto an online menu containing reasons for awarding points. With a click of a mouse, points are awarded and an e-mail is forwarded to the recipient informing him or her of the award and the reason for the recognition.

The latter aspect of this kind of program will be crucial to its eventual success, says Sandie Hodel-Runtz, president of the National Association for Employee Recognition, Naperville, Ill., and senior staff representative, corporation recognition, for United Airlines.

“You have to align the reward with the action,” Hodel-Runtz says. “It's not the reward, but the awarding of the points, which is important. The most important piece [of such a program] is how you reward your employee. … Then comes the reward. It's not the opposite.”

That's not to say that employees won't appreciate the practical value of the points they can rack up. St. Alphonsus' employees can redeem their points for more than 1,700 items in an online catalog, from a box of Godiva chocolates to a powerboat. Employees can redeem their points for travel as well.

People have online accounts that they can access to check point totals. And they can create wish lists of the prizes for which they are aiming. When the employee goes online, Carissimi says, he or she will see his account, along with a prompt telling the employee how many more points are needed to “get that Harley-Davidson he's after.”

While the program has been well received by the hospital's 3,200 employees, it has needed some work. For example, the hospital found that one hospital staffer was awarding all his points to his mother. “We had to come up with a new policy,” Carissimi says. “No giving points to family members.”

But despite the fine-tuning, he says the program has succeeded in “rewarding those behaviors we want to encourage. It's a bigger, broader way of giving people what they want, and getting the organization what it wants.”

Part of the Culture

Labor Ready Inc., a Tacoma, Wash. — based company that provides temporary manual labor to the light industrial and small business markets, introduced a companywide, point-based incentive program in 2001 to help combat employee turnover rates of 90 percent to 100 percent. With the inauguration of its incentive program, that figure has been cut to 40 percent, according to Tom Stonich, vice president of human resources.

While points are rewarded in conjunction with sales campaigns and meeting production goals, supervisors also have the authority to award points for going above and beyond. “It's a way for us to encourage our supervisors to recognize people,” he says. “It really has become part of our culture.”

From her perspective as the district manager for Labor Ready's five Puerto Rico branches, Evelyn Mejia says the program has “definitely” helped her to keep employees. “We get letters from customers saying a branch has done an outstanding job,” she says. “We'll award points.

“Before the program, there was a lot of turnover. People came and went,” she adds. “This program helps a lot.”

Once they have accumulated enough points, employees can choose from an extensive menu containing everything from washing machines to airline tickets. Mejia redeemed her points for a 90-piece tool set, and another employee has used his points to acquire a treadmill, a television/VCR combo, a basketball hoop, and a home theater.

“It's a great program,” she says.

Avoiding Waterpark Woes

In Wisconsin Dells, Wis., Noah's Ark Water Park, which bills itself as “America's Largest Water Park,” employs 550 people each summer. The majority “would bolt two weeks before Labor Day if they didn't have an incentive to stay,” says Shelly Rucinski, director of personnel for the 70-acre facility.

Now, any employee who stays through Labor Day receives a bonus of $1 for every hour he or she works during the summer. Noah's Ark also has instituted an incentive system based on supervisor, peer, and customer evaluations. Up to 150 deserving employees receive anything from portable CD players to laptop computers. And like the dollar-per-hour bonus, only employees who stay through Labor Day are eligible to receive the merchandise at the end of the summer.

In past years, evaluations were used to award one employee an automobile at the end of the summer. That practice was changed, Rucinski says, because it didn't provide much of an incentive for the vast majority of the park's employees.

According to Rucinski, the park has been able to keep about 80 percent of the employees it hires until the end of the summer. “If we didn't [have the incentives] it would be devastating,” she says. “Everyone would leave two weeks before the end of the summer. We would have to shut down.”

Other Perks That Work

While merchandise and travel incentive programs may have their place in a company's employee retention efforts, effective recognition efforts “don't have to cost tremendous amounts of money,” says Sandy Hodel-Runtz of the National Association for Employee Recognition, Naperville, Ill.

For one, “Give time back,” she suggests. “Time will be a precious commodity in the future.”

Family-based rewards will be appreciated as well, she says, pointing out that a Blockbuster gift card, museum passes, or restaurant gift certificates are inexpensive, yet much appreciated awards. And they recognize not only the efforts made by an individual employee on a company's behalf, but the sacrifices made by the employee's family.

Derek Carissimi, vice president of human resources for St. Alphonsus Hospital in Boise, Idaho, says his company's recognition efforts don't end with its point-based incentive program. “We do a lot of spontaneous things — give out theater tickets or restaurant gift certificates, hold pizza parties, do a lot of family events.”

Barbara Glanz, an employee motivation consultant located in Sarasota, Fla., says companies must get beyond the traditional “boring posters on the wall, plaques, and parking spots.” One idea she recommends is having a supervisor call an employee's mother in recognition of a job the employee has done. “It's just a wonderful thing to do that people will never forget.”

North Island Financial Credit Union in San Diego offers perks such as on-site massage therapy, gym and aerobic classes, health insurance for pets, and savings account startups for newborns. The company's employee turnover rate is about 10 percent — a low figure for an industry with employee retention problems, says Janet Owens, the company's vice president of benefits and compensation. She credits much of that to the company's benefit mix, which, she says, “is much appreciated.”