Designing your employee recognition programs to align rewards to the employee’s performance is standard practice. After all, you want to encourage your team to make a significant contribution to business growth and profitability.
But what if you have a reward structure that is based on employee performance and yet your revenue, team morale or business performance has not improved?
Could we be missing the mark and rewarding our employees for the wrong things?
What Type of Rewards Motivates Employees To Perform?
When considering reward programs, it is important to get to the heart of what motivates people. The fact that financial rewards are motivating is indisputable, however, while an annual salary increase or bonus will likely assist in retaining staff, it is not necessarily the best way to ensure ongoing commitment, motivation and engagement.
Many organisations hand out rewards without making a specific connection to how the individual earned the reward.
Basing rewards on arbitrary performance evaluations does not send the right message to employees. So you achieved an ‘above standard’ or high rating performance evaluation at your annual review, what does that actually mean? What day-to-day behaviours are recognised? How are these actions and behaviours linked to the organisation meeting its strategic objectives?
Ideally, employees will feel motivated to fulfil their work tasks and stay with an organisation for reasons that go well beyond the annual financial reward they receive. Businesses should want their employees to perform well because they get an innate satisfaction from doing so, not because of a carrot that is hung in front of them as part of a once or twice a year performance and salary review process.
Understanding Intrinsic Motivation
Financial rewards are extrinsic rewards – that is, they are the tangible rewards that are given to employees by Managers that are external to the work itself and that are determined by other people.
Intrinsic rewards, on the other hand, are the psychological rewards that employees receive from doing meaningful work and doing it well. They are the positive charges that employees experience from fulfilling their work tasks that keep them actively self-managing and engaged in their job. These include:
- Sense of meaningfulness – this involves the sense the employee gets from the value of the purpose that is trying to be achieved. This is a feeling of contributing to something important and feeling a strong sense of purpose and direction.
- Sense of choice – this refers to the employee’s ability to choose how they perform their work so that they feel a sense of ownership and responsibility for their work.
- Sense of competence – this is a feeling for the employee that they are doing a good job, that they are meeting or surpassing their standards and expectations and they feel a sense of satisfaction and/or pride.
- Sense of progress – employees feel encouraged that their work is accomplishing something. They see genuine progress towards their goals and the company goals giving them confidence in the future.
How Do Employers’ Benefit?
If employers are able to spark these intrinsic rewards in their employees, they will reap many benefits that go well beyond what traditional rewards can achieve. Employees with high intrinsic reward levels will show greater levels of focus and energy. They also are more likely to be retained – which is positive retention – not merely the retention of staff cannot afford to leave.
Intrinsically rewarding work provides a healthy level of motivation as there is a much smaller chance of burn out. This type of motivation is based on a shared desire between employer and employee to focus their work on contributing to a meaningful purpose which underpins the vision of the business. It really is a win/win situation for employees and employers.
Intrinsic motivation creates a high performance and high engagement culture with fewer stress issues. These employees also tend to become the best advocates for your business as they are more likely to refer your business to their friends as a great place to work.
Despite all of these advantages to intrinsic rewards, managers and organisations are still heavily focused on financial rewards to motivate their employees. There are a few things that businesses can do to increase the likelihood of their employee base feeling the magic of intrinsic rewards:
- Ensure a clear and meaningful purpose – this needs to involve more than just profit. It needs to focus on the contribution and the value that the organisation provides to its customers and stakeholders.
- Build intrinsic motivation and rewards into leadership training programs – ensure that all the managers in your business understand the difference between intrinsic and extrinsic rewards. This should start with managers first understanding their own intrinsic reward levers.
- Connect employee tasks to the purpose and vision of the business - ensure all performance and development discussions are focused on how the employee’s role connects to the bigger picture. This means cascading goals down though the organisation, from the organisation level, to the executive team, to the individuals, and then having frequent discussions about progress.
- Empower employees at all levels to make decisions about what, how, where and when they work – trust that your high performing employees have the skills and know-how to do their job well. Ensure you practice flexibility in the true sense and that you simply guide and support rather than micro-manage your employees.
- Instil a sense of competence in employees - provide regular positive feedback and learning opportunities, recognition of skills, stretch tasks and sharing of knowledge and insights.
So while considering your performance and reward process for the upcoming new financial year, it is important for businesses to remember that while pay is an important consideration for most workers in accepting and staying in a position, extrinsic rewards are less important when you are looking at day-to-day motivation levels.
If you focus your performance processes all on external motivators, you will not only waste time and money but you may also lose the interest of your top performers.