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Are Employee Rewards Programs a Good or Bad Idea?

business.com editorial staff
business.com editorial staff

Employee incentives do not always have to involve money. Many employees just want to hear a "thank you" and "great job."

  • Employee recognition programs are a great way to let your employees know you appreciate the job they do.
  • Reward programs help you keep the staff you have and encourage new talent to work for your company.
  • Your rewards program is only as good as the way you implement it into the organization.

Studies have shown that employee rewards programs can be a good idea. (Companies with some kind of recognition program have 31% lower turnover, according to Bersin & Associates.) But the execution of an employee rewards program can be bad or good.

Why are employee rewards important? 

Talk Business understands that employee rewards play an important role in the culture of the company. When employees are rewarded, it can have beneficial impacts on both the employee and employer.

Rewards can increase productivity, encourage the team to work together and attract new talent to your company. An employee reward system can also help you retain the staff you have.

How do you create a reward system for employees?

Bonusly gives us four steps to create a reward system program for employees. The first step is to understand what you hope to accomplish from your rewards program. You should understand what problem you are trying to solve by creating this program and determine how much you want to spend. It may be surprising to learn that rewards do not have to be expensive to be meaningful. You might want to consider using a reward system app to help you keep track of your rewards.

You want to find leaders that can help you promote and carry out this program. It takes follow through and leadership that is committed to making it happen.

What are the different types of employee rewards?

There are many different types of employee rewards. Some rewards work well for some employees but will not work well for others. Your budget can be a driving factor in what type of rewards you hand out to employees. The different reward types you should consider include public recognition. This might be a companywide email that recognizes an employee for a job well done. You could include a write-up about specific employees in the company newsletter. You could plan a surprise gathering with cake in honor of the job a specific employee completed. 

Private praise also works well. You could send an employee a handwritten note that thanks them for something they did. You can schedule a meeting with the employee for the sole purpose of thanking or congratulating them. One of the typical rewards you might think of is giving your employee a bonus or a raise. You could even promote that employee and give them a new job title or special project. You could even invite that person to a meeting with executives.

What incentives work best for employees?

The best incentives are the ones that work for your employees. Each business is different and made up of many different people. The incentives do not always have to involve money. Many employees just want to hear a "thank you" and "great job." Employees wanted to be appreciated and feel valued by their employer. Incentives for employees may be much easier than you originally thought.

Additional tips on the good and bad of employee rewards programs  

The bad

Employee of the month

What's wrong with recognizing a high achiever every month? The problem is that by picking one employee, you're not picking others who may have worked just as hard. Those not picked may feel resentful for being overlooked.

Also, typically once an employee gets the honor, they become ineligible to win again for some period. While this might seem to promote fairness, it's not much of a continuing incentive for past winners.

Service anniversaries

Maybe the gold watch to commemorate a long-term employee upon retirement is appropriate, but a recognition program that gives out pins or plaques for service anniversaries just rewards people for hanging around.

The problem isn't so much that there's something wrong with recognizing longevity, as that it doesn't motivate employees to improve performance, which is the whole point of a rewards program.

As Forbes contributor Josh Bersin points out, research shows that "tenure-based rewards systems have virtually no impact on organizational performance. Did you stay an extra year at your last job so you could get a 10-year pin? I doubt it."

Regularly praising people just for doing their jobs

People are getting paid to do their jobs. You reward people for exceeding normal expectations of doing a good job. Yet too many managers persist in praising people for doing what they are supposed to be doing.

If you're continually rewarding people for routine work, how can you expect them to put in the extra effort that truly deserves special recognition and rewards?

The good

Peer recognition

Management's selection of top performers is always going to be suspect, no matter how genuine and objective the selection is. People will always suspect managers of playing favorites or that there are political reasons behind a selection. You can eliminate this by asking peers to choose who they think should be recognized. In fact, letting peer employees recognize top performers is itself recognition of confidence that those in the trenches are the best judges of who is doing an outstanding job.

Performance-contingent, goal-oriented recognition

People like to know exactly where they stand. A program that sets realistic goals and clearly articulates the reward for achieving the goal does this. Anyone who meets a stated criterion (e.g., exceeding quarterly sales targets by 15%) is rewarded.

Timely recognition

Recognition should happen soon after the goal is achieved. This way, the recognition reinforces the behavior you're trying to encourage. Since the employee is already feeling good about the accomplishment, timely recognition serves to enhance those feelings and further motivate extra effort.

 

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