Reward Strategy
In a competitive business climate, more business owners are looking at improvements in quality while reducing costs. Meanwhile, a strong economy has resulted in a tight job market. So while businesses need to get more from their employees, their employees are looking for more out of them. Employee reward and recognition programs are one method of motivating employees to change work habits and key behaviours to benefit your business.
Reward Vs. Recognition
Although these terms are often used interchangeably, reward and recognition systems should be considered separately. Employee reward systems refer to programs set up to reward performance and motivate employees on individual and/or group levels. They are normally considered separate from salary but may be monetary in nature or otherwise have a cost to the business.
Although employee recognition programs are often combined with reward programs they retain a different purpose altogether. Recognition programs are generally not monetary in nature though they may have a cost to the business. A way of looking at it is that recognition elicits a psychological benefit whereas reward indicates a financial or physical benefit.
In designing a reward program, a business needs to separate the salary or merit pay system from the reward system. Financial rewards, especially those given on a regular basis such as bonuses, commission, etc., should be tied to an employee's or a group's accomplishments and should be considered "pay at risk" in order to distance them from salary. By doing so, the business can avoid a sense of entitlement on the part of the employee and ensure that the reward emphasises excellence or achievement rather than basic competency.
Designing a Reward Program
The keys to developing a reward program are as follows:
• Identification of business goals that the reward program will support
• Identification of the desired employee performance or behaviours that will reinforce the business goals
• Determination of key measurements of the performance or behaviour
• Determination of appropriate rewards
• Communication of program to employees
In order gain maximum benefit such as increased productivity, the design of a reward program must identify company or group goals to be reached and the behaviours or performance that will contribute to this. While this may seem obvious, companies frequently make the mistake of rewarding behaviours or achievements that either fail to further business goals or actually sabotage them. If teamwork is a business goal, a bonus system rewarding individuals who improve their productivity by themselves or at the expense of another does not make sense. Likewise, if quality is an important issue, the reward system should not emphasise rewarding the quantity of work accomplished.
Since rewards have a real cost in terms of time or money, it’s important to confirm that performance has actually improved before rewarding it. Most reward programs use multiple measures which can include such variables as improved financial performance along with improved customer service, improved customer satisfaction and perhaps reduced defects.
When developing a rewards program, it’s important to consider matching rewards to the end result for the company. Perfect attendance might merit a different reward than saving the company $10,000 through improved contract negotiation. It is also important to consider rewarding both individual and group accomplishments in order to promote both individual initiative and group cooperation and performance.
Lastly, in order for a rewards program to be successful, the specifics need to be clearly spelled out for every employee. Motivation depends on the individual's ability to understand what is being asked of him or her. Once this has been done, reinforce the original communication with regular feedback promoting the program and managing momentum. Keep your communications simple but frequent.
Recognition Programs
In order to develop an effective recognition program, the business must separate it from the company's reward program. This ensures a focus on recognising the efforts of employees. To this end, although the recognition may have a monetary value (i.e. gift vouchers etc.), money in itself is not given to recognise performance.
Like rewards, the method of recognition needs to be appropriate for the achievement. This also ensures that those actions which go farthest in supporting business goals receive the most attention. However, a business should remain flexible in the methods of recognition, as employees are motivated by different forms. Finally, employees need to clearly understand the behaviour or action being recognised. A business can ensure this by being specific in what actions will be recognised and then reinforcing this by communicating exactly what an employee did to be recognised.
Both reward and recognition programs have their place in businesses. By rewarding and recognising outstanding performance, Companies will have an edge in a competitive corporate climate.
Contact Commercial Hub HR for a no obligation discussion on how to re-align your reward strategies for increased profitability.
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