The ability to select rewards and time them properly is one of a manager’s most important tools. It is used for increasing the effectiveness of their work collective. As reward systems are perceived to be related to employee motivation, they can address a number of managerial objectives. There are several purposes of reward systems: they help an organization to reduce turnover, retain great employees, be more competitive, and reinforce the image of a company among future employees and stakeholders.
Basic Elements for a Great Reward System
A well-constructed strategic reward system should address four areas: benefits, compensation, appreciation and recognition. Reward systems that usually fail are those which do not address all the elements, or when the elements they do address are not aligned with organization’s other business strategies in the right way.
There are two types of employee behavior and activity-performance that should be recognized and rewarded. When it comes to performance, there is a direct link between the set goals and the final result, thus making it the easiest one to address. What is more challenging is rewarding specific behaviors that made significant improvements and differences to your business. What are you to compensate your employees for? Identifying behaviors that are important to your organization (for example, helping employees expand their skills or enhancing customer relationships) is the first step.
Financial compensation is usually at the top of the list, when thinking of reward systems. However, remember that money matters, but it is not the only thing you should provide in order to reward and motivate. The right reward strategy should include an incentive compensation plan, such as longer-term reward for the most valuable individuals (most often it has been some kind of equity ownership).
The benefits you provide are also going to be noticed by your employees. If you do not match or exceed the benefit levels of competitive companies, attracting and retaining great workers will be difficult.
The low-cost, but high-return elements of a successful reward system are appreciation and recognition. People like to know whether they are doing bad, average or good, as well as get the acknowledgement from managerial personnel for specific accomplishments. Simply by stopping by their desk to express gratitude, sending a personal note or thanking them in front of their co-workers will have a positive impact on their self-esteem and will motivate them for further accomplishments.
Extrinsic and Intrinsic Rewards
Rewards that are not tangible and do not have an obvious external incentive are known as intrinsic. They provide a kind of internal satisfaction to employees, and are more effective over time, but using them Is a difficult task for every manage. External rewards tied to certain skills, roles, time or behaviors are called extrinsic. The employee has to see the reward for it to be effective. Examples of extrinsic motivators are various types of praise, money, awards, giving extra days off, providing prepaid visa gift cards or tickets to a sports event or a concert.
The Increase of Using Nontraditional Rewards
The avoidance of using traditional rewards will continue to grow as more managers realize the importance of individualizing reward systems. Methods of this kind of individualization are flextime, working from home, and reduced workweek.
Flextime allows employees to be in the office during a predetermined time frame, it emphasizes productivity, and give them some freedom (in that flexibility zone) while still meeting organizational and client needs. It does not work in all situations, but has proved to be very effective for employees and organizations.
Working from home has become possible with various technological advancements (high-speed Internet connection and computers connected to the workplace network). It enables people to perform their jobs basically from anywhere. Working from home can allow workers to concentrate on more important projects and offer fewer workplace distractions. Also, instead of spending time on commuting, employees are able to make more effective use of their work day.
Staggered daily schedule is an alternative to a reduced workweek (employees work 4 out of 5 days, but longer work hours). Work hours can freely be allocated by employees, who will still work their designated weekly hours. If an employee has to drop off children to school in the morning, he or she may want to come late and leave later from work. Others might prefer coming to work earlier, but also leaving earlier.
Review your strategic reward system and see what elements it addresses. Does it include all elements? Is it doing the best for your performance goals? Is it driving the right behaviors for your organization? Do not wait, but start fixing and adjusting it right away if needed.