Employee Motivation: How Does It Increase Through Rewards?

Rewards are known to be among the best ways to show your appreciation to your team. But they do more than just that. They are also effective at motivating employees, which is always a challenge for companies, especially right now when most people are working from home and worrying about the pandemic. Employee motivation is vital to every organization. It’s one of the factors that can make or break your business.

What is employee motivation?

Deloitte defines employee motivation as the employee’s “inclination to expend discretionary effort toward organizational goals”. It’s the level of energy and desire that allows them to stay committed and interested. Importantly, it is the aspect that drives them to go to work every day and achieve their goals inside the company.

Employee motivation is critical because it determines the quality of work that your team is producing. If they’re not motivated, you can’t expect them to give you excellent results. Heck, you can’t even expect them to do any work at all. So how do rewards help stimulate employee motivation?

1. Rewards make employers work harder.

A 2016 survey by WorkHuman Research Institute showed that 79% of employees work harder when they are recognized. Meanwhile, 78% say they become more productive after being rewarded. It’s not just about getting the reward itself, it’s more about being appreciated in the workplace. This is the case especially with Millennials and Generation Z employees who are now taking over the workforce. They are not just after a good salary and benefits. They also want to have a fulfilling job where their efforts are recognized and rewarded. 

2. Rewards make employees happier.

Employees’ happiness is usually a priority among employers. When the staff is happy, they are also more productive. When morale is boosted, it leads to less turnover and a greater chance of achieving the company’s goals. Rewards can contribute to your team’s happiness and satisfaction. Moreover, when they are happy at work, chances are they’ll be happy at home too. It’s not always on management’s radar as much as it should be - a happy home life is known to help people perform better in the workplace.

3. Rewards make employees trust their employers more.

Trust is essential inside a company. It helps build stronger relationships among colleagues themselves and between employees and management. In the WorkHuman survey, 86% of employees stated that they trust their superiors more after being recognized. One reason is that people want their bosses to see their hard work. So, when leaders reward their efforts, employees are more inclined to trust them. When there’s trust inside the organization, people are motivated to work harder to achieve the company's goals.

Now that you know what rewards can do for your team, it’s time to consider creating an employee rewards program that will suit your company. Before anything else, you should distinguish between rewards and recognition. They may refer to the same thing sometimes, but they are two different things.

Rewards are usually monetary. They cost companies a lot, which is why they’re more common among big enterprises than small businesses. In addition, they can be consumed or transferred. They are also fixed and based on specific parameters. On the other hand, recognition is not tangible. It is also spontaneous and a little more personal.

What are examples of employee rewards programs?

1. Variable Pay / Pay-For-Performance

There are times when companies offer lower salaries than their competitors. However, they make up for it using a variable pay program, which can be in the form of a bonus or stock option. This rewards system puts a part of the employees’ pay at risk. It is dependent on their performance as well as their team’s performance, or that of the company. This kind of compensation program can give your people a challenge that can motivate them, but keep in mind that the goal must be reachable. If not, the risk is that they will ignore it and settle for what they can get.

2. Bonuses

This type of rewards program is common among sales companies. They encourage their employees to aim for bigger profits. But even if you’re not in the sales industry, you can still give bonuses to your employees to recognize outstanding performance. Once upon a time, bonuses were only allotted to a single person. Now, the focus is more on teams. You may want to think about how you’re going to implement this rewards program as experts claim that bonuses are just short-term motivators. But don’t worry, there are still many businesses finding that bonuses are a powerful incentive to encourage productivity.

3. Profit-sharing

If you want to promote teamwork and encourage your employees to stay with your company, you may want to give profit sharing a try. This system involves distributing a percentage of your company’s profit to your team. Usually given at the end of a fiscal year, this reward can be presented as cash or added to their 401(k) plans. Most profit-sharing programs require a period before a person receives the money, which can help reduce turnover. Moreover, this rewards system can keep fixed costs at a minimum.

4. Stock options

In the past, only upper management in large enterprises benefited from stock options, but over time, even start-ups began doing it too. This program allows employees to purchase a specific number of the company’s shares at a fixed price after a given period. For instance, the board of directors and shareholders may only offer it to those who have stayed with the company for 10 years. Like profit-sharing, stock options help reduce turnover. What’s more, businesses are entitled to tax deductions on this form of benefit.

How to design a rewards program?

Before you start giving out rewards to your employees, you should carefully plan the program to ensure its success. Not all rewards systems will effectively promote employee motivation. They have to be well thought out and managed properly. There are several things you should consider:

1. Ensure that the rewards program will support your company goals.

Your rewards should be in line with the outcome that you hope to achieve. For example, you can’t provide the same reward for employees who have achieved perfect attendance to the ones who secured a new client for the company. They should be different from one another in size so that employees will aim to get the greater prize.

2. Identify the behaviors you want the program to encourage.

Rewards aren’t just for showing appreciation. They can also help in developing the attitude that you want your employees to have. For instance, create a group-based reward if you want your people to develop teamwork. At the same time, prepare something that will recognize individual initiative as well.

3. Determine how to measure this performance and behaviors.

Remember that giving rewards costs money, so formulate a clear set of criteria that can help you measure your employees’ performance. These can be in the form of more sales, happier customers, increased production, or earlier submission of projects. You need these benchmarks so that you can tell whether there’s an actual, measurable improvement in performance. 

4. Find out which rewards program will suit your company.

Not all rewards systems are necessarily beneficial, so you should carefully choose which one will work. Consider your goals, budget, and nature of work. It may be counter productive to give variable pay if that will cause your employees to overwork themselves. On the other hand, don’t get carried away with bonuses, or else you might use up your company’s budget without producing the desired results.

5. Explain the program to your employees.

For your rewards systems to be effective, your employees should understand how they work. Make sure your parameters are easy to understand. This will motivate your people to take part in the program. Once you get that done, start promoting the program and keep everyone updated if there are any changes.

Developing and implementing a rewards program requires money and time. You will spend money for its execution and the reward itself. You will use precious time in putting the program together, in explaining how it’s going to work with your employees, and in administering the rewards once the goals are met. So, you have to manage it properly in order to ensure that you get the most out of your resources. In this way, you’ll start reaping the benefits - having a highly motivated team that can produce quality work both individually and together.

Rewards can do great things for employee motivation. It can encourage not only your engaged employees but also disengaged team members (or the employees that you are close to losing). Just make sure that you have put your program together the right way. Moreover, be consistent in the implementation of the reward system. Always remind your people of its presence. Mention it whenever you have a chance. This will increase employee motivation slowly but surely. However, rewards are just one of the things that can do this. There are also other tips that you can try out to motivate your team.

“Employees who believe that management is concerned about them as a whole person - not just an employee - are more productive, more satisfied, more fulfilled. Satisfied employees mean satisfied customers, which leads to profitability.”
- Anne M. Mulcahy

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