Reward strategies should be based on years of research dedicated to studying the effects of rewards on employee performance, not the manager’s preference or intuition. Below is information explaining the components of successful employee rewards programs.
There are different types of rewards programs that companies can implement. These types are not mutually exclusive, but rather should all be implemented to some degree in order to gain the most desired effect.
Both individual rewards and team-based rewards have a positive influence on performance, however, team-based rewards can have more of a significant impact on employee performance. Therefore, effective employee rewards programs should include both types of reward programs but should place an emphasis on team-based rewards as they have a tendency to have the largest impact.
Example of a competitive employee rewards program at Samsung.
Thus, both competitive and non-competitive reward programs result in significant increases in performance. A comprehensive rewards strategy should include both types.
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Considering when to reward an employee is critical in ensuring the reward system has the largest possible impact on behavioral change. In many cases, the schedule of reinforcement can actually be more influential on behavioral change than the magnitude of the reinforcement. There are two types of reinforcement schedules:
Continuous reinforcement is when every target behavior is rewarded. An example of this is paying a bonus every time an employee reaches a performance target. This type of reinforcement schedule is very effective in quickly shaping employee behavior when starting an unfamiliar task.
Intermittent reinforcement is when the reward does not follow every target behavior response. This type of reinforcement will result in higher frequencies of the desired behavior. It is effective in maintaining the desired behavior after it has become a habit.
There are 4 types of intermittent reinforcement schedules and each has a different impact on employee behavior:
Continuous reinforcement is very effective in quickly shaping employee behavior until it becomes a habit. Once the behavior has become a habit, variable ratio and variable interval schedules of reinforcement are the most effective schedules of reinforcement. Using these schedules of reinforcement results in the most significant behavior change in employees and this change is most resistant to weakening.
The length of the employee rewards program has an impact on employees’ subsequent performance. A recent meta-analysis found that, in general, the longer the implementation of an incentive program, the greater the performance gains:
The effect of long term incentive programs may be so robust because they act to continually shape employee behavior in order to make it a better fit for the organizational culture and preferences. This results in work performance that is more in line with company standards and as a result, contributes more value to the company. Thus, when deciding on the length of an employee rewards program, managers should consider making it long term (last longer than 6 months) in order to gain the most desired results.
Rewards have a different impact on the employee’s motivation and subsequent performance during each stage of their work. Rewards can act to motivate the employee to:
In sum, rewards have significantly less of an impact on an employee starting a new task (15% increase in performance), than they do in motivating them to persist at the task (27% increase in performance) and to work smarter on the task (26% increase in performance).
Identifying the desired outcome of rewards is essential in developing the most effective rewards program in a company. The goals of a good rewards system should be multifaceted. It should be designed to:
Managers seeking to create an effective rewards program should ensure that the program’s objectives are multifaceted. Including each of these 5 goals is critical to the success of any rewards program.
It is critical that managers seeking to develop or enhance an employee rewards program must first understand the components required for success. Doing so could mean the difference between implementing an ineffective employee rewards program and a successful one. Implementing a successful employee rewards program will result in increased profits, increased employee satisfaction and a larger ROI.