Incentives: Why Rewarding Your Employees Is Important

Teamwork, women in business, team, positivityDear Ask Me Anything About Business: I already pay my crew well and thank them for making deadlines. Why should I give them formal appreciation? – Asking For a Friend

Dear Asking For a Friend: Studies show that recognition motivates better performance. To learn why that’s good for your company’s bottom line, read on.

This fictional exchange suggests that there are two different kinds of workers: those who live for just a paycheck, and those who live to do their jobs well. These motives can and do overlap. But if a paycheck is the only stimulus employees can expect, they are less likely to care about the quality of work they perform.

Rewards and Recognition Engage People with Their Jobs

Author Daniel Pink explains that satisfying the basic human needs that tie into motivation is what truly engages working people with the tasks they do. While a salary is half of the social contract for an employment relationship, the other half—motivation to report and perform each day—is left to the employee. And motivation is a complicated state of being.

In his book Drive: The Surprising Truth about What Motivates Us, Pink notes two fundamental needs that propel workers past the showing-up stage and toward excellence: mastery and purpose. When we recognize people for their efforts, we acknowledge their attempts to master their jobs and to gain personal satisfaction that transcends the simple completion of tasks. In addition to earning a paycheck, in other words, we give them an overarching reason to want to contribute to a company’s goals. This can be seen in the business mission, values, and vision that we ask staff members to sign on with.

But monetary remuneration is not strong enough to align people with concepts of purpose. Acknowledgment for getting on board with and furthering these ideals is more effective. When we can tie employee performance to the achievement of a company’s goals—market share and otherwise—we close the motivational loop that creates engagement.

Remember, Praise Is More Important than “Stuff”

Research has revealed a ceiling to money’s power to motivate. It works, to a point, particularly with jobs involving repetitive or mechanical tasks, but less so with more cerebral or creative activities, as Pink also found. So, when are monetary rewards effective? Periodically, and sparingly.

A 2010 study co-sponsored by WorldAtWork holds that tangible rewards, such as one-time cash prizes, annual bonuses, and salary increases, work best as appeals to talented managers. These individuals can then focus on satisfying the mastery and purpose needs of their direct reports and recognizing quality performance with intangible rewards.

Intangible forms of recognition include verbal and written thank-yous, write-ups in the company newsletter, and gatherings that celebrate a team or staff member. Managers can and should encourage these appreciative gestures by setting an example, asking employees to laud coworkers’ efforts, and acknowledging excellence in a group setting. Award ceremonies or casual mentions of individual achievements inspire audience members to attempt to match or outdo a colleague’s performance.

Acknowledgment Programs Build a Culture of Trust

Both types of recognition, then, affect the group’s motivation and ultimate engagement levels. But they have another intangible effect: the impact on the team’s trust for each other and for the company. This is what holds a workforce together and allows them to collaborate, innovate, and reach objectives together.

Humans are naturally wary of one another. That’s why it’s such a big deal to cultivate a culture of trust in the workplace. When we have that, we can row together. When we don’t, we may compete or withdraw to the group’s detriment.

Seeing a coworker praised for good work, though, tells us that person is trusted by another … which fosters faith in their ability and motives. It tells us we are safe to depend on them, and this psychological safety frees us to concentrate, try new things, and strive to do as well as they do.

An uptick in performance—evidence of mastery and alignment with purpose—directly correlates to engagement. Research firm Gallup links greater levels of engagement with things like better customer satisfaction, fewer at-work accidents, longer job tenures, and bigger profits. Are these not goals that every company would like to reach? Just asking for a friend.

Chris DyerAbout the author

Leadership speaker Chris Dyer is recognised remote team, performance and company culture expert and author of The Power of Company Culture (Kogan Page, 2018).

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