How can you effectively align rewards to performance

Doing so will provide all parties with a better understanding of the correlation between productivity and incentive. Offering a variety of unique and valuable rewards can incentivize employees to work harder and smarter. Do they want scheduling freedom? Maybe they place a greater value on social events or a nice catered lunch. Additionally, savvy leaders should magnify the lifecycle of the rewards process by publicly naming recipients.

This not only enhances the value via peer recognition for recipients but also inspires other employees to perform at a higher level. Too often, companies obsess over major accomplishments.

Of course, celebrating big wins is important, but tunnel vision on major accomplishments may detract from recognizing all the work that went into the smaller milestones along the way — milestones that were essential to making your big win happen.

Your rewards program should be tiered, offering up praise, perks, and recognition throughout the lifecycle of a project, not just at the finish line. In this way, your employees will feel supported and motivated every step of the way, leading to a productivity boost. Plus, strengthening relationships within and between departments improves collaboration, innovation, and communication throughout your company.

A great rewards program should focus on engaging and rewarding team efforts. Your team-based rewards should be more substantial than individual rewards. For example, if you assign a project to an engineering time and they tackle it in record time, consider rewarding them with a team outing to a location of their choice. Effective team-based rewards encourage and increase cooperation, engagement and employee productivity.

A little friendly competition between peers is healthy in the workplace. However, it should be in moderation, especially considering the benefits of teamwork as touched on above. An overly competitive environment can lead to unhappiness and employee burnout, which is the antithesis of a desirable rewards and recognition initiative.

An effective rewards strategy will ideally include rewards earned through competition e. That way, your company offers a diverse array of rewards and employees feel a healthy amount of pressure from peers and managers to achieve at work.

While you can get away with gamifying rewards in moderation, do not gamify your recognition program. Gamifying recognition removes the impact of genuine recognition and can encourage employees to manipulate the system. Your priority with recognition should be to send genuine notes of appreciation to hard-working employees — a goal that evaporates once you gamify the system and make recognition competitive. This will actually result in a loss of productivity, as employees focus their efforts on how to get more recognition instead of excelling at their jobs.

Employees can quickly become bored with certain rewards, which can decrease the value of the reward over time. If you want employees to constantly strive for excellence, update your rewards often to create a sense of urgency with your employees.

As mentioned previously, rewards can be tied to performance data. As your business objectives change, benchmarks for rewards and recognition should also evolve. Refresh them often to ensure your employees are always excited about their rewards program. For example, even if no one else notices or rewards you for superior performance on a task, you can still reward yourself with a mental pat on the back for a job well done or a sense of satisfaction for overcoming a challenge.

A recurring debate among managers focuses on the issue of whether money is a primary motivator. Some argue that most behavior in organizational settings is motivated by money or at least monetary factors , whereas others argue that money is only one of many factors that motivate performance.

Whichever group is correct, we must recognize that money can have important motivational consequences for many people in many situations. In fact, money serves several important functions in work settings. These include serving as 1 a goal or incentive, 2 a source of satisfaction, 3 an instrument for gaining other desired outcomes, 4 a standard of comparison for determining relative standing or worth, and 5 a conditional reinforcer where its receipt is contingent upon a certain level of performance.

Even so, experience tells us that the effectiveness of pay as a motivator varies considerably. Sometimes there seems to be an almost direct relationship between pay and effort, whereas at other times no such relationship is found. Lawler suggests that certain conditions must be present in order for pay to act as a strong motivator:. Under these conditions, a climate or culture is created in which employees have reason to believe that significant performance-reward contingencies truly exist.

Given this perception and assuming the reward is valued , we would expect performance to be increased. Secrecy about pay rates seems to be a widely accepted practice in work organizations, particularly among managerial personnel. Available evidence, however, suggests that pay secrecy may have several negative side effects.

To begin, it has been consistently found that in the absence of actual knowledge, people have a tendency to over estimate the pay of coworkers and those above them in the hierarchy. As a result, much of the motivational potential of a differential reward system is lost. Even if an employee receives a relatively sizable salary increase, she may still perceive an inequity compared to what others are receiving.

This problem is highlighted in the results of a study by Lawler. In considering the effects of pay secrecy on motivation, Lawler noted:. Almost regardless of how well the individual manager was performing, he felt he was getting less than the average raise. This problem was particularly severe among high performers, since they believed that they were doing well yet received minimal reward. They did not believe that pay was in fact based upon merit.

This was ironic, since their pay did reflect performance. Thus, even though pay was tied to performance, these managers were not motivated because they could not see the connection. Pay secrecy also affects motivation via feedback. Several studies have shown the value of feedback in motivating performance see previous discussion. The problem is that for managers, money represents one of the most meaningful forms of feedback.

Pay secrecy eliminates the feedback. When salary information is open or at least when the range of percentage increases within a job classification are made known to the people in that group , employees are generally provided with more recognition for satisfactory performance and are often more motivated to perform on subsequent tasks. It is easier to establish feelings of pay equity and trust in the salary administration system. On the other hand, publicizing pay rates and pay raises can cause jealousy among employees and create pressures on managers to reduce perceived inequities in the system.

There is no correct position concerning whether pay rates should be secret or open. The point is that managers should not assume a priori that pay secrecy—or pay openness—is a good thing. Instead, careful consideration should be given to the possible consequences of either approach in view of the particular situation in the organization at the time.

Rewards serve several functions, including 1 stimulating job effort and performance, 2 reducing absenteeism and turnover, 3 enhancing employee commitment, 4 facilitating job satisfaction, and 5 facilitating occupational and organizational choice.

Rewards may be distributed on the basis of power, equality, need, or distributive justice. Distributive justice rests on the principle of allocating rewards in proportion to employee contribution. Intrinsic rewards represent those outcomes that are administered by the employee e. As a result, employees are generally more interested in facilitating corporate performance. Skills-based incentives reward employees on the basis of the skills they possess, not the skills they are allowed to use at work.

As a result, employees are encouraged to continually upgrade their skill levels. A lump-sum salary increase simply provides employees with their pay raises at one time possibly shortly before summer vacation or a major holiday.

Participative pay decisions allow employees some input in determining their pay raises. Skip to content Performance Appraisal and Rewards. Functions of Reward Systems Reward systems in organizations are used for a variety of reasons.

It is generally agreed that reward systems influence the following: Job effort and performance. Hence, reward systems serve a very basic motivational function. Robustness of supporting environment and processes: Sometimes the factors that get in the way of alignment are the very processes that support and help deliver the reward strategy.

Some factors to watch out for are:. Top management Involvement: Creating alignment is hard work and demands a lot of time and attention from the top management. Some of the ways in which the top management can support the alignment process are:. Lastly, I would not recommend trying to fix everything all at once. Take the time to study the data, listen to your employees and then address the aspects that matter the most. Know where to start to get maximum impact. Did you find this story helpful?

What are the top work tech investment focus areas for your company currently? Subscribe now. READ the February issue of our magazine to find out how organizations are doing it. Account Login Subscribe. Why is your rewards strategy not delivering results? Some factors to watch out for are: The Performance Management System — Is it fair, transparent and objective? Organization Structure — Is it geared to deliver business strategy and performance?

Role definitions — Do people know what is expected of them in their job? Behaviours — Are we encouraging the right behaviours needed to achieve our business goals? This would ensure that all employees are aware of the future direction of the company. Be vocal about the reward strategy and how it links with business goals. Role modelling: Every leader in the organization must be a role model for behaviours desired for business success.

They should demonstrate company values through their actions on a day to day basis.