Article: The power of an effective rewards and recognition program

Compensation & Benefits

The power of an effective rewards and recognition program

A robust rewards and recognition program ensures a happy, satisfied, loyal, highly motivated and an energized workforce that is willing to walk the talk and make a difference to the bottom line of an organization.
The power of an effective rewards and recognition program

In a competitive business environment, management is looking at ways to improve the quality of their products and services, while reducing costs.  While businesses are looking towards getting more out of their employees, employees are looking towards their firms to get more out of them.  Employee reward and recognition programs are a way of motivating employees, improving their key behaviors, enhancing their productivity and value-additions to the firm.  

Though rewards and recognition are spoken of in the same breath, they should be considered separately.  A reward system is meant to reward performances and motivate employees.  They are separate from pay packages but may be monetary in nature.  These emphasize excellence achieved, walking the extra mile and going far beyond expectations. 

Recognition programs are meant for a different purpose altogether.  They provide a psychological benefit to employees and make them look good in front of their peers and teams.  

Designing a rewards and recognition program

  • Identify the goals of the team and the company that the program will support

  • Recognize those performances and behavior that is aligned with the team’s and the firm’s objectives and goals

  • Determine key measurements of performances and achievements

  • Decide on appropriate rewards

  • Communicate this news to the concerned employees and to the organization at large

  • Types of reward programs

Variable pay

Variable Pay is tied to the performance of the company, the success, and performance of a business unit or an individual’s outstanding achievements.  This is a one-time award that works as an incentive to motivate employees to continue performing very well.


Bonuses are usually used in sales organizations to generate additional business or higher profits.  This should not be looked at as yearly compensation, entitlements and a right of every employee to be given a bonus.  Rather, it is a motivator for an employee’s outstanding performance in the year gone by.  This can be used as a powerful tool to encourage top-level efforts.  In fact, bonuses act as a differentiator between your organization and the competition, in defining who gives out a better bonus package for performances.  

Profit sharing

At the end of the financial year, depending upon how the company has performed, an employee is awarded a percentage of the company’s profits, to reward his or her performances.  This benefit can take the form of cash or other methods.  Those employees that stay put in the company over a period of time are rewarded for their contributions in this manner.  

Stock options

Previously, this was the territory of top management or senior level executives.  But things have changed now and are becoming an increasingly popular method of rewarding employees.  Employees have the right to buy a certain number of the company’s shares at a fixed price for a specified period of time.  This works as a long-term motivator for those employees who have been with the company for a certain number of years.  After obtaining these stocks, the employee is allowed to sell his or her share in the market and the difference in the bought and sold amounts works as a profit for the employee.  

Other forms of reward and recognition programs can come in the form of lunches and dinners at 5-star hotels, gift coupons, plaques, certificates, funding children’s education, a lifetime’s health insurance for the individual and the family, an all-expenses paid holiday within the country or abroad and much more.

Why is this so important?  Awesome teams are built through a sound and robust rewards and recognition program and companies unleash the full potential of their employees.

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Topics: Compensation & Benefits, Strategic HR

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