Staff Rewards and Incentives - The Psychological Effect

Staff rewards and incentives are not nice-to-haves but must-haves in today's fiercely competitive job market. Talent acquisition and retention have become difficult and organizations are under increasing pressure to find innovative ways to keep their workforce engaged and motivated.

Traditional approaches to employee retention are no longer sufficient; instead, companies are strategically leveraging staff rewards and incentives as a critical tool in their arsenal. These rewards, whether monetary or non-monetary, serve not only as a means of appreciation but also as a catalyst for enhanced productivity, loyalty, and overall job satisfaction.

Research by Fiserv highlights the significance of these incentives, revealing that a substantial 41% of employees would choose to remain with their current employer if they felt adequately rewarded and recognized. This statistic is not just a number; it reflects the growing demand for meaningful acknowledgment of employees' contributions. 

As businesses continue to navigate the complexities of employee retention, understanding the evolving landscape of rewards and incentives is essential. This blog delves into why these strategies are more than just perks—they are pivotal to building a thriving organizational culture that attracts and retains top talent.

What are staff rewards and incentives?

Staff rewards and incentives are programs and benefits provided by an employer to recognize, motivate, and reward employees for their contributions to the organization. These programs can range from monetary bonuses to non-monetary perks like extra vacation days, public recognition, or opportunities for professional development.

Companies with unique staff rewards and incentives

Following are the unique staff rewards and incentives offered by enterprises.

1. Airbnb is known for its exceptional staff rewards and incentives because it offers a comprehensive benefits package, including stock options that give employees a stake in the company's success. Unique perks like travel credits allow employees to experience Airbnb listings, enhancing their connection to the product. The company also emphasizes a strong, inclusive culture where diversity is celebrated, and employees feel valued and respected. 
2. Meta offers a strong benefits package, including health care, wellness programs, generous parental leave, and stock options. The company also provides on-site services like meals and fitness facilities, creating a supportive work environment.
3. Microsoft provides a wide range of benefits, including healthcare, paid parental leave, retirement plans, and stock purchase options. The company also offers career development programs and a supportive, inclusive workplace culture.
4. Adobe is known for its comprehensive benefits, including generous paid time off, wellness programs, and employee development initiatives. The company also offers stock options and bonuses, fostering a culture of recognition and growth.

Rewards vs. Incentives: What's the Difference?

While the terms "rewards" and "incentives" are often used interchangeably, they represent two different concepts:

• Rewards are typically given after the achievement of a goal or after the completion of a task. They serve as a form of recognition for the hard work and success of an employee. Examples of rewards include bonuses, promotions, and gift cards.
• Incentives, on the other hand, are designed to motivate employees to achieve specific goals or behaviors. They are offered in anticipation of an achievement to encourage employees to work towards a particular target. Common incentives include performance-based bonuses, commission structures, and contests with prizes.

Understanding the distinction between rewards and incentives is crucial for designing a program that effectively motivates employees and aligns with organizational goals.

Why are staff rewards and incentives essential?

Implementing a well-structured staff rewards and incentives program has numerous benefits. Here are some of the key reasons why these programs matter:

1. Boosting Employee Morale: According to a study by Glassdoor, 81% of employees reported that they feel more motivated to work when they are recognized for their efforts. Rewards and incentives create a positive work environment where employees feel valued and appreciated, leading to higher morale.
2. Increasing Productivity: Companies that implement rewards and incentive programs often see a significant increase in productivity. A study by the Incentive Research Foundation found that incentive programs can increase performance by 22%. When employees know that their hard work will be recognized and rewarded, they are more likely to put in extra effort. Salesforce’s “Ohana Culture” exemplifies this, with rewards linked to achieving sales targets, resulting in a 23% boost in sales productivity.
3. Attracting and Retaining Talent: In a competitive job market, a strong rewards and incentives program can set a company apart from its competitors. According to a survey by Deloitte, 58% of employees consider a company's rewards and benefits program when deciding where to work. Offering attractive incentives can help attract top talent and reduce employee turnover. For example, Google’s peer-to-peer recognition programs contribute to its impressive employee retention rates.
4. Fostering a Culture of Recognition: A well-designed rewards and incentives program can help build a culture of recognition within an organization. This culture encourages employees to celebrate each other's successes and fosters a sense of camaraderie and teamwork.

The psychological impact of rewards and incentives on staff

The psychological impact of staff rewards and incentives can be understood through various scientific theories and principles in psychology. These concepts explain how rewards and incentives influence employee behavior, motivation, and overall well-being.

1. Operant Conditioning and Reinforcement Theory:

Operant Conditioning, introduced by B.F. Skinner, is a fundamental concept in behavioral psychology. It explains how behavior is shaped by rewards (reinforcements) and punishments. In the workplace, when employees receive positive reinforcements (rewards) for their behavior, such as bonuses for meeting targets, they are more likely to repeat those behaviors. This concept is central to the design of incentive programs that aim to increase specific behaviors like productivity and performance.

2. Self-Determination Theory (SDT):

Developed by Deci and Ryan, the Self-Determination Theory posits that people are motivated to grow and change by three innate and universal psychological needs: competence, autonomy, and relatedness. Rewards and incentives can satisfy these needs by providing employees with a sense of accomplishment (competence), allowing them to choose how they achieve their goals (autonomy), and fostering a sense of belonging or connection to the team (relatedness). When these needs are met, employees are more likely to experience intrinsic motivation, leading to higher job satisfaction and engagement.

3. Cognitive Evaluation Theory:

A sub-theory of SDT, Cognitive Evaluation Theory, suggests that external rewards can sometimes undermine intrinsic motivation if they are perceived as controlling. However, when rewards are perceived as recognizing competence or are seen as a means of supporting autonomy, they can enhance intrinsic motivation. This underscores the importance of designing rewards and incentives that are aligned with employees' values and interests.

4. Expectancy Theory:

Expectancy Theory, proposed by Victor Vroom, states that individuals are motivated to act in a certain way if they expect that their efforts will lead to a desirable outcome. In the context of staff rewards and incentives, this theory implies that employees are more likely to be motivated if they believe that their efforts will result in meaningful rewards. The effectiveness of incentive programs, therefore, depends on clear communication of expectations and the perceived value of the rewards.

Here is a case study on how the Expectancy Theory helps in the workplace

This case study, titled "Expectancy Theory and Job Behavior I" by Edward E. Lawler III, explores the relationship between managers' expectations and their job performance. Over a year, data from 69 managers in a retail sales organization were analyzed.

The study found that while managers' expectations were linked to their effort and performance, adding the importance they placed on these expectations did not improve predictions of their behavior. The research also examined whether expectations directly caused better performance, but the evidence was limited.

Additionally, when the managers' abilities and their understanding of their roles were considered alongside their expectations, the ability to predict performance improved significantly.

This case study raises important questions about the role of expectations in job performance and suggests that further research is needed to fully understand how expectancy theory applies in real-world settings. For a deeper dive into the findings and implications, you can explore the full case study through the provided link.

How to build a rewards and incentives program for employees?

Creating an effective staff rewards and incentives program requires careful planning and execution. Here are some steps to help you build a program that enhances employee performance:

1. Identify Your Goals: Start by identifying the specific goals you want to achieve with your rewards and incentives program. Whether it's increasing productivity, reducing turnover, or improving employee morale, having clear goals will help you design a program that aligns with your organization's objectives.
2. Understand Employee Preferences: Different employees are motivated by different things. Conduct surveys or focus groups to understand what types of rewards and incentives are most appealing to your workforce. Some may prefer monetary rewards, while others might value time off or opportunities for professional development.
   
   and Research shows that 65% of U.S. employees prefer non-monetary bonuses over other forms of recognition. This indicates a strong preference for tangible rewards that directly impact their financial well-being.
3. Choose the Right Mix of Rewards and Incentives: Based on your goals and employee preferences, choose a mix of rewards and incentives that will motivate your employees. Consider offering a combination of financial and non-financial rewards to cater to a diverse workforce.
4. Set Clear Criteria: Make sure that the criteria for earning rewards and incentives are clear and transparent. Employees should know exactly what they need to do to receive a reward or incentive. This will help avoid any confusion or frustration and ensure that the program is perceived as fair.
5. Communicate the Program: Once your program is designed, communicate it effectively to your employees. Use multiple channels, such as email, company newsletters, and team meetings, to ensure that everyone is aware of the program and understands how it works.
6. Monitor and Adjust: Regularly monitor the effectiveness of your rewards and incentives program. Collect feedback from employees and analyze performance data to determine if the program is achieving its goals. Be prepared to make adjustments as needed to keep the program relevant and effective.

Conclusion

Staff rewards and incentives are essential tools for enhancing employee performance and satisfaction. By implementing a well-structured rewards program that recognizes achievements and motivates future performance, organizations can foster a more engaged and productive workforce. To learn more about creating impactful staff rewards, and get customized rewards catalogs and data-driven insights, speak to an Empuls expert today!

FAQs