Rewards

The implementation of an incentive structure to build employee motivation, target specific aspects of firm operations, build loyalty to the firm and to provide opportunities to reward the hard work of employees.

Useful for retaining key high-performance staff and differentiating income between equivalent roles. Rewards systems must be:

• equitable (available to all), 

• clearly communicated to all, 

• relevant to employees (desired), 

• cost effective and 

• aligned with business strategic goals.

Extrinsic reward: An external motivator that requires the transferral of monetary value to employee; cash bonuses, material rewards, fringe benefits (car), holiday, tickets to shows. Can be interpreted as ’buying’ loyalty and rejected.

Intrinsic reward: Sense of satisfaction and drive employees feel that is derived from the role itself (very powerful; recognition and gratitude are nearly universally desired). These cost the firm nothing financially, except time and consideration. Sense of purpose / achievement validates hard work; makes employee feel valued. Could be an award, a letter from boss, opportunity to be promoted, more responsibility…

Poorly designed rewards systems can lead to internal conflict, loss of trust, and loss of motivation with higher staff turnover (the opposite of desired impact). The use of performance pay (bonuses) can build incredible loyalty to the firm and drive productivity, can can also contribute to tension in a team. 

Key things to consider include:

• Performance management systems: unbiased, explicit and relevant data

• Rewards appropriate behaviour: incentive structures will re-orient energy of staff in certain directions—they should be good directions (ethics)

• Group / team incentives Vs Individual: how administer rewards to members of a team? Based on group outcomes or individual roles within?