A culture of employee recognition benefits everyone and the impact of positivity has a ripple effect - the same goes for the impact of not feeling valued.
Employees who feel like what they do matters directly affect the success of a business. An employee recognition and rewards program boosts job satisfaction, happiness, retention, engagement, productivity, morale, commitment, and loyalty. In addition, it offers healthy competition between peers. The evidence speaks for itself.
Evidence that Employee Recognition Matters
Employee recognition statistics are extremely compelling:
- 29% of employees have not received recognition for good work in over a year, if at all.
- 80% of employees would work harder if they felt better appreciated.
- Strong employee recognition programs reduce turnover rates by 31%.
- Employees who are recognized are almost six times more likely to stay at their jobs than those who aren’t.
- 37% of employees report that the best way to improve their engagement is for their superiors to give them recognition.
- 92% of employees are likely to repeat a specific action if given recognition for it.
Consider The Ultimate Guide to Employee Recognition as a resource to create a positive company culture and boost employee engagement.
While the two are undoubtedly related, employers often incorrectly bunch employee recognition program ideas and employee rewards together. But they’re not the same.
The Difference Between Employee Recognition and Rewards
The definition of recognition is “appreciation or acclaim for an achievement, service, or ability”.
Is Employee Recognition Only About Recognizing Success?
A Harvard Business Review article notes “We often use the words ‘recognition’ and ‘appreciation’ interchangeably, but there’s a big difference between them. The former is about giving positive feedback based on results or performance. The latter, on the other hand, is about acknowledging a person’s inherent value.”
This differentiation is significant because recognition and appreciation are bestowed for distinct purposes. In any process where an employee’s aim is to achieve a specific outcome, there will inevitably be setbacks and obstacles along the journey. Inevitably then, if you only recognize success, recognition comes exclusively at the end of this journey. Moreover, depending on the nature of the project, there might not be concrete positive outcomes to highlight.
By solely concentrating on praising favorable results, i.e. focusing solely on recognition, you overlook numerous chances to engage and encourage your team members for their effort— to show them appreciation.
Employee recognition, we can therefore argue, consists of proclamations of recognition and appreciation. There are, in fact, many different types of employee recognition to consider — public, private, written, verbal, peer-to-peer recognition, and so forth. But none of these necessarily involve a reward. A reward is, technically speaking, something altogether different.
Defining Employee Rewards
The definition of a reward is “a thing given in recognition of one's service, effort, or achievement”. So, by definition, a reward includes giving a “thing”. A tangible piece of evidence that represents the employer’s recognition and benefits the employee.
Naturally, since a reward benefits the employee, a culture of giving rewards (employee reward systems, if you will) is also an incentive to do well.
So what “thing” should employers be giving? That depends on a variety of factors such as individual employee feedback, manager involvement, the support to run the program, budgets and potential tax implications for employees who receive rewards or gifts, and the type of platform a company is considering.
The Types of Employee Rewards Companies Should Have in Place
Rewards come in all shapes and sizes and occur both in public and private.
Some companies offer rewards in the form of extravagant bonuses while others prefer non-monetary incentives. Each offers different experiences and can have a big impact. Ultimately, the goal is to offer a variety in order to attract, engage, motivate, and retain top talent.
Monetary Rewards
Monetary or financial incentives are easy to quantify and allocate but can come with tax implications. For example:
- Bonuses that comprise a percentage of an employee’s salary.
- A commission on a sale.
- A bonus allocated to reaching a specific metric target.
Financial incentives may also include salary raises, profit sharing, and stock options.
A gift card handed to an employee who, for example, delivered an exceptionally successful presentation teeters on the divide between a financial and non-monetary reward. It also, generally speaking, sidesteps the tax issue.
Because monetary rewards are directly linked to an employee's performance, achievements, or contribution to the organization, they are great motivators. The better an employee fares at work, the more they earn.
Although a boost in income is certainly helpful for employees to purchase what they need, or to buy the luxuries they most want, it does lack in connection. Money can feel rather impersonal to some. Companies therefore also need “things” that are non-monetary rewards.
Non-Monetary Rewards
These rewards do not involve direct financial compensation but aim to motivate and recognize employees by gifting a specific item or experience. We can break down non-monetary rewards into four subcategories— gifts, tokens, concessions, and opportunities.
Non-Monetary Rewards that are Gifts
In the context of this article, let’s define a gift as a “thing” which has monetary value, but that is not spendable money. In order to give a gift to an employee, an employer needs to spend money and purchase it. The “thing” can be an object or an experience. For example:
- A watch given to reward an employee’s loyalty to the company.
- Tickets to watch the game and have some fun with their co-workers given to the team with the highest sales.
- A prime parking space that belongs to the employee of the month.
Non-Monetary Rewards that are Tokens
Tokens fall squarely under our classification of a “thing”. However, they are not necessarily things with any intrinsic value. Tokens mean something only because they are received as a form of recognition. For example:
- A floating trophy awarded to the best-performing team.
- A plaque presented to an employee after X years of service.
- A certificate with a unique employee award title presented at the company’s year-end function.
Non-Monetary Rewards that are Concessions
Rewarding employees can come in the form of asking less of them or allowing them a special perk on a temporary or permanent basis, based on their performance. Concession examples that can be considered rewards are:
- Leaving the office early on Fridays, provided sales targets are met.
- A paid day off to rest after putting in hard work for celebrating a big achievement.
- A free lunch for the team to celebrate a month of record earnings.
Non-monetary Rewards that are Opportunities
Employee rewards may also come in the form of career advancement opportunities. A typical scenario is when a top employee is rewarded with a promotion. Other career-advancing opportunities that can be considered a reward are:
- A mentorship with one of the company executives.
- Accompanying senior colleagues on an important networking trip.
- Company-sponsored training opportunities an employee wants to pursue
- Involvement or leadership of a special project that would otherwise be beyond the employee’s scope
Starting an Employee Rewards Program
Regardless of the types of rewards you intend to offer at a company, getting employees and managers involved and excited about the rewards program is critical to its success.
Employee rewards programs work best when the following are in place:
- The rewards program is easy to understand, implement, and sustain
- The program is aligned with company values and goals
- The program allows for employees to receive rewards in a timely manner
- The program is performance-based and the criteria for employee work that gets rewarded is objective
- The program is promoted within the company, and
- The program promotes a positive work environment where it is fun for others to cheer on the winner.
Fortunately, when it comes to executing a program, there are plenty of fit-for-purpose tools companies can depend on. Dedicated employee recognition software can help employers manage rewards and recognition without too much human administration, which means a higher likelihood of long-term adoption. And it does not need to break the bank. There are a variety of options Human Resources teams can select from.
When choosing a recognition platform for your organization it is important to also consider if the team is remote, hybrid, or on-site to determine the best way to share and communicate the achievements of an individual or a team. Setting up an effective reward program requires that employees see their peers being rewarded and the incentives provide inspiration to mimic rewarded behaviors.
Also consider the following:
Employee Rewards Program Do’s and Don’ts
Employee reward programs require good planning to succeed and are often built on beliefs that cash, gift certificates, and contest schemes are good enough. There is much more to a rewards program than that. For starters…
Don’t just start arbitrarily giving out rewards. The program should be intentional about what achievements, milestones, and behaviors rewards are given for, and to what extent. This ensures fairness and consistency.
Don’t use negative language for your expectations. Receiving an “X days without screwing up” reward is not a positive achievement an employee can feel good about.
Don’t make your system too complicated. If your rewards program is confusing, takes up a lot of managers’ time, or becomes a hassle to maintain, it won’t last.
Don’t wait too long to give a reward. Offer your employee reinforcement as soon as possible after the rewardable behavior. Immediate and frequent feedback is especially critical when you are first teaching a new skill.
Do determine specific behaviors you want to teach your employees. If you want more collaboration, reward collaborative effort. If you want more innovation, specifically incentivize proposals for innovative solutions— even when they don’t work.
Do create positive behavioral expectations. It’s about what employees do that’s valuable and uplifting to the organization, not what they don’t do wrong.
Do create a system that is easy. Easy to implement, easy for managers to adhere to on an ongoing basis, and fun to be a part of.
Do give very specific praise and feedback to your employees. For example, “The effort you made [here] by doing [this] had [these] results, and therefore [added value].” is much more useful to the employee than just saying “Great job!”
Do focus on extrinsic rewards. In other words, rewarding behavior that is above and beyond the requirements of the job, not what the employee would have done or accomplished with their own intrinsic motivation.
Essential Steps to Starting an Employee Rewards Program
1. Clarify Goals
What is the intended purpose of the rewards program? For example, if the objective is to drive employee retention, a good thing to reward is tenure, work anniversaries, and so forth.
2. Align with Managers
You’ll need buy-in from all levels for sustained interest and use of your rewards program.
3. Decide on a Rewards Budget
Work out what the company can afford in gifts, PTO, and other types of employee rewards. Bear in mind that the rewards program itself may have a positive effect on the bottom line through increased productivity and retention - all of which ultimately impact the customer and, by proxy, sales.
Investigate the cost and benefits of using an employee rewards platform. Understanding employee rewards software best practices is essential to make a decision here, because the right vendor will depend on your specific needs.
4. Form a Rewards Committee
The objectives of the committee is to discover what rewards motivate employees, generate employee reward ideas, engage the team, and develop criterion so everyone has a chance to win.
5. Launch!
Launching the program in a big way, generating excitement, promoting it, and having regular, celebratory announcements will keep the program top of mind for everyone.
6. Measure Results
Evaluating the effectiveness and response of employees is necessary for continued success.
Some Final Thoughts
In my nearly 30 years of Human Resources experience, I have seen the ripple effect of positive cultures, and negative cultures.
I have worked in cultures so focused on recognition and rewards that getting something extra for everything an employee did became the norm. This led to a company that kept wanting more in return which led to burnout.
I have worked in companies with good intentions, but where a few leaders did not practice or value the initiatives. I have also seen organizations where the only time people heard anything was when they were doing something wrong. And so on and so on.
What separates the successful from the unsuccessful programs is a genuine leadership team who is all-in. These leaders practice positive recognition, are aligned on core values, and offer a program where good work is directly correlated to recognition and rewards.
Paramount to the success of this is a company that seeks input from employees on what it is they truly want and offers a variety of rewards to consider unique individual motivators. Additionally, a successful rewards program communicates, measures, and assesses the impact it makes regularly. This information is used to make changes in a timely manner.
When you regularly celebrate achievements—small and large—your business reaps the benefits. An employee rewards program boosts job satisfaction, happiness, retention, engagement, productivity, morale, customer satisfaction, commitment, and loyalty— all good things that are well worth pursuing in your organization.
