"Incentives and rewards are some of the most powerful management tools available" (Cited from "Making innovation Work", written by Davila, Epstein & Shelton).
People work against some compensation. We do not expect people to come to work day after day if s/he does not receive anything in return. Yet, when we deal with rewarding, we redefine the scope, speaking not only about salary (or self-contentment in case of volunteers). People expect to be rewarded; they expect a system that will encourage those who do well and punish those who do not).
A close examination of what I written above, can teach about two objectives in rewarding:
The first sentence was cited from an excellent book I read on innovation. Innovation deals with changing the organization; leaving the current situation and replacing it by another one. Rewarding, as to the authors, is an essential tool for aiding this change and help it turning into organizational reality. If you want to change peoples' behavior, give them incentives before and while changing, and reward them after.
The second objective of rewarding is somewhat different. It deals with the daily routine, motivating us to continually work and perform better. It resembles the gasoline, which every car needs a steady supply in order to continue driving. This need is part of our genes as people, and it only grows with us being knowledge workers, choosing whether to stay and how well can we perform.
It is obvious why rewarding is so important: To help maintaining and to help changing.
The problem starts as rewarding is not as simple as we would wish.
It is not simple to reward, as, due to researches, to much rewarding, leads to poor performance. I think the reason is twofold: First, people get used to the rewards, and the level of rewarding required grows higher. The second reason has to do, with the fact that people understand that less is required from them in order to actually win the reward, and they naturally will tend to make fewer efforts.
It is not simple to reward as no company lives in a vacuum: The employees have expectations regarding what they were use to in previous places of work; towards what they hear from friends and family; and towards what happens in the market in which the company works. It is very easy to be drawn after others and build some rewarding system that does not serve us as a specific organization. Acting otherwise and not answering employees' expectations, and un-satisfaction and de-moralization can follow.
It is not simple to reward, as rewarding should be proportional to the phenomenon or behavior which we want to encourage. As already I have written in previous posts, measuring is difficult. In many cases, it is complicated to estimate how much each individual contributed to some success.
However, the main question is not why rewarding is not simple, yet how should it be done.
First, an organization has to conduct its own rewarding system, based on its unique organizational culture; I recommend not following others, not to be drawn after the industry, nor neighbors or friends. The saying "we are unique" can lead to a positive implementation, if communicated properly. Of course, expectations should be leveled with new employees, before they are hired, and as part of the interviewing process. In case of an existing organization, wishing to change its current rewarding system, things are more complicated. I read a study, conducted by Kaplan, claiming that people tend to become fixated on existing incentive and rewarding systems and resist the change. Such a change has to be managed, according to all well-known change management methodologies.
Second, any rewarding system has to be based both on organization needs as well as on the individual needs. In general, organizational needs are in high congruence with achievements and results, while individual needs are more connected to efforts. Both need to be rewarded. Rewarding can be "hard", mainly money in all formats, starting with higher salary, bonuses, stock options, etc. Rewarding can be "soft", examples including recognition, promotion, publication, compliments, professional course, etc. Using Maslow's needs pyramid can help in designing the rewarding system. What I find important is to balance between the two, being sensitive and wise.
Any rewarding system, no matter how designed, should answer some principles in order to be effective:
- Fairness. Living in a situation where other employees do understand why their colleague was rewarded and not them. Any rewarding system should aspire to reward individuals when the organization was rewarded significantly.
- Answering the individuals' needs. No matter if the rewarding is for a team or for the individual, s/he has to be touched and motivated.
- Balanced in scope. Too generous rewarding systems are not considered effective, and in some cases harm. To little yet communicated rewarding, will have cynical interpretations.
- Flexible. Never pre-define everything. Always there are unexpected situations in which an employee should be rewarded. The rewarding system has to be flexible enough to answer these situations as well.
- Stable. Do not change to often the rewarding system.
And most important-
- Suitable. Fitting the organization's spirit.
I hope we all succeed rewarding our employees and motivate them to work properly and change when appropriate. At the end of the day, we have to remember, that rewarding is one of the most powerful management tools available.