Article: Engage the employee with the right rewards

Employee Engagement

Engage the employee with the right rewards

Managers must recognize that the rewards strategy is a combination of tangible and intangible rewards
Engage the employee with the right rewards

An award given in a non-cash format (e.g. vouchers) retains the relevance and recall. Cash typically does not retain an identity or association


Till very recently, the only ‘rewards strategy’ that organizations had was to dangle the carrot of a larger bonus at the end of the year. The financial collapse of 2008 pretty much exposed the flaws in that strategy. Another not-so-good strategy is to overdo non-monetary awards and hand out badges for everything without really paying much, thereby trivialising the whole exercise. To get the rewards strategy correct, managers must recognize that the ‘reward’ people look for when it comes to work is a combination of tangible rewards (compensation, bonus, promotion) and intangible rewards (recognition, praise, acceptance and a supportive culture).

The response employees give to rewards depends on the relevance and the reinforcement of the actual reward. A large cash bonus for sustained excellent performance over the year given at the end of the year in secrecy has a significant tangible benefit but almost nil intangible effect as there is no meaningful acceptance within the peer group associated with that reward. On the other hand, a smaller award given right after the win and done so transparently has a high intangible benefit in addition to the tangible – there is peer recognition, there is transparency and there is a high degree of relevance of the award to the achievement.

An award given in a non-cash format (e.g. vouchers) retains the relevance and recall. Cash typically does not retain an identity or association. It’s common for employees to retain the stubs of the vouchers for a very long time – ‘that stub was the first award I got in this company’ has a much higher recall than a bank book entry. On the other extreme, rewards given out to one and all based on designation or seniority eventually degenerate into being perceived as a right rather than a reward.

One challenge that is staring HR in the face is the young workforce. Though it is premature to conclude that GenY is less interested in rewards, it doesn’t imply that the older approach to Total Rewards will be effective for young and older workforce alike. GenY has grown up in the longest period of peace and relative prosperity. They are also the first generation that is ‘digitally native’ in the true sense. With this generation, one size fits all no longer works.

Mistakes and the right approach

  1. A very common mistake is using the same approach in the entire organization
  2. Over emphasis on cash rewards (either as bonus or as handouts). Cash tends to have very low recall and relevance to the activity unless it is high quantum value. Whereas a pizza voucher for solving a tough technical problem and a weekend getaway for delivering a project has a clear perceived value difference and higher recall, which drives motivation and organizational loyalty as well.
  3. Not thinking through strategy is another mistake. Rewards for the sake of rewarding – done sporadically or infrequently – has little or no value. Rewards should drive desired behavior that deliver business impact. This can only be achieved when the rewards are thought through, aligned with required business objectives and implemented as a part of the organizational culture.
  4. Total rewards should actually be the core of any employee engagement strategy. Compensation and benefits as the only components of a corporate reward strategy are woefully inadequate. When implemented in the traditional format of a salary plus annual/semi-annual bonus compensation model with legally mandated leave benefits thrown in, it is hardly seen as rewards and is just the bare minimum requirement.

A competent engagement strategy should be built on the compensation and other benefits with work-life balance, recognition and development opportunities that are correctly aligned with the overall business requirements and organizational culture.

Read full story

Topics: Employee Engagement, Compensation & Benefits, #ExpertViews, #TotalRewards

Did you find this story helpful?



How do you envision AI transforming your work?