Engage the employee with the right rewards

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

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.