From the January 2008 issue of Entrepreneur

After Megan Driscoll co-founded PharmaLogics Recruiting, she occasionally rewarded salespeople with $100 bonuses or gift cards. "It never seemed to motivate anybody," she says. In 2006, the nine-person Braintree, Massachusetts, recruiting firm began a new program: Every six months, the top salesperson gets a $25,000 all-expenses-paid week's vacation for six at a luxury villa in Costa Rica. "It was very well-received," says Driscoll, 32. "We've seen people dramatically change the way they work because they want to win this."

Extravagant bonuses, perks and benefits do a lot to attract, motivate and retain employees at smaller companies that can't compete with bigger employers' financial compensation, says Chris Widdess, president of Signature Days, which sells incentive experiences. "Giving an employee an experience they've always dreamed of is not only motivating and inspiring, but it also allows them to recharge their batteries and come back with a can-do attitude," says Widdess.

The idea is to give employees something luxurious, exotic or self-indulgent that they would never purchase for themselves even if they could afford it. Widdess' customers often choose experiences that let them send groups of employees. This builds team spirit and social connections, he says. Giving an experience instead of an item also increases loyalty and motivation because it's harder to put a price on a memory.

Extravagance need not be costly. Widdess offers experiences ranging from $50 massages to a $9,000 rock-and-roll fantasy camp. You can order perks from companies like his or arrange your own. Matching the cost to the benefit can ensure quick payback. Driscoll's average fee for placing a candidate is $38,000, so just one extra placement from the perk puts her in the black. "And I think we're looking at an extra sale per person [each contest period]," she adds.

Driscoll says one concern is that the same employee will win repeatedly, so she's considering awarding the top two salespeople to avoid that. But so far, offering a superperk has worked out well. Says Driscoll, "They're superpsyched about it."