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POWER
REWARDS: Rewards that really motivate
By Dean R.
Spitzer
Sometimes a jelly doughnut or a handshake is as effective, if not more effective, than a monetary bonus. Find out how to institute the right awards.
Despite unprecedented efforts to motivate employees, employee motivation is at an all-time low. And, despite the enormous investment in rewards, recent studies show that the majority of hourly employees and manager in the United States report feeling "underrewarded".
American business is increasingly discovering that not only are traditional rewards extremely limited in their ability to motivate employees, but they are also very costly. In too many companies, the reward system has become a bottomless pit into which millions, even billions, of dollars are thrown away annually, while employees complain that the rewards they receive aren’t particulary rewarding, and frequently find the reward system itself is one of the most demotivating aspects of their company.
Creating a meaningful, cost-effective reward system is one of the most important challenges facing any organization today.
How effective is the reward system in your organization? If you would like to do a quick evaluation, take the quiz on page 47.
What are power rewards?
Much has been written about the misuse of rewards. Rewards have been accused of being manipulative and controlling, and of undermining intrinsic motivation in the workplace (see Punished by Rewards by Alfie Kohn, Houghton Mifflin, 1993). "Power rewards", on the other hand, release enormous energy in employees without most of the problems endemic in traditional rewards. They are empowering, not manipulative. They work synergistically with intrinsic motivation, and do not undermine it. In short, they make people feel special and energized.
Certainly, it would be nice if people would work at full throttle without the need for any external rewards, but, while all human beings have a high degree of self-motivation, we also need some external motivation as well. As Euripides so eloquently put it, "In every work, a reward added makes the pleasure twice as great". Power rewards are rewards that:
Why rewards fail
There are eight major reasons that organizational rewards fail to have the desired motivational impact. Following are those eight reasons, as well as strategies your organization can use to turn rewards problems into high-impact motivational opportunities.
Problem #1: Excessive dependence on monetary rewards. Traditionally, organizations (and employees) have associated rewards with money. This is because money has been viewed as the common denominator of achievement.
But money has some serious motivational limitations. For one thing, the correlation between the monetary value of rewards and motivation is not very high. In most jobs, the best performers are not necessarily the highest-paid ones.
Monetary rewards don’t have much staying power. They are commingled with other monies and soon forgotten. In fact, studies have shown that a pay raise, on average, has a motivational impact of less than two weeks. Furthermore, direct deposit has contributed significantly to reducing the motivational impact of monetary rewards.
Monetary rewards are also very costly. No matter how much money a company might give, employees will soon become "habituated" to it. This has led to the well-known phenomenon called "reward inflation". As one observer says, "Attempting to motivate workers by financial means requires ever-increasing financial rewards to make the same impact".
Furthermore, while money will always remain the foundation of any reward system, excessive emphasis on financial rewards tends to create "money motivation", rather than "good-work motivation". When people are striving for money, they will often take the shortest and fastest route to maximize their financial gain – even if it means sacrificing quality. Under such conditions, customers simply become a means to an end.
Power Reward Strategy: Recognize the limitations of money, and supplement it with other, more cost-effective forms of rewards. There are many motivating factors that can be used to replace or augment money as a reward.
| Some Common Motivators |
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These motivators have the awesome power to positively transform the entire work environment, making work more motivating for everyone. What’s more, these motivators are a great deal less expensive – and typically much more motivationally effective – than money and other traditional rewards.
Problem #2: Lack of recognition value. In addition to their monetary value, rewards should have recognition value (the extent to which recipients experience appreciation for their performance). Of the two, the recognition value is by far the most important element from a motivational perspective. In fact, when workers and supervisors were asked to rank a list of motivators from 1 to 10 in order of their importance to workers, workers rated "appreciation for a job well-done" as their No. 1 motivator. In contrast, supervisors rated it No. 8. This difference in perception is one of the major reasons that most employees feel underrewarded at work.
The problem is not limited to supervisors; few organizations realize the importance of recognition to employees either. My wife used to receive a large end-of-year bonus at the law firm where she worked. This bonus was lumped in with her last paycheck of the year, without any comment of appreciation. Although substantial, this bonus had no recognition value whatsoever.
Power Reward Strategy: Build a high degree of recognition value into every reward you offer. Recognition is the most cost-effective motivator there is. While the high cost of other rewards forces us to give them sparingly, recognition can be given any time, at very little cost.
Some very ordinary items and events can be imbued with extraordinary motivational significance, far in excess of their monetary value. I am constantly amazed at how motivating a 30 cent doughnut can be if is given with sufficient appreciation. A sincere thank you can be delivered at any place and at any time, costs absolutely nothing and can be more motivationally powerful than a substantial monetary bonus.
Organizations can provide innovative recognition in an infinite number of ways. For example, a small manufacturing company made its employees feel like heroes when they attained a major safety milestone – 100 days without a single accident. On the morning of day 100, it was announced that a catered lunch would be served the next day, if they made it to the 5:30 shift without an accident. At 5:15 anticipating was building. Managers took confetti and streamers to the balcony overlooking the shop floor. When the 5:30 whistle blew, there were congratulations all around, confetti flew through the air and banners were unfurled. It was a great moment for everyone – and one that was not soon forgotten. The recognition value of this celebration was extremely high, while the monetary cost was relatively low.
Highly motivating organizations even celebrate small successes. A health-conscious company distributes fruit bowls to employees’ work areas when key personal milestones are attained. Another company uses a more fattening approach: fresh-baked chocolate-chip cookies to say thank you.
Problem #3: Entitlements. Entitlements include base salary of wages, cost-of-living increases, benefits and any other rewards that are given to employees regardless of performance. Employees come to expect them just for being there, rather than for being motivated or getting results.
While these golden handcuffs do keep employees around, they do little to increase motivation or performance. Studies have shown that employees who have been conditioned to an entitlement mentality are generally less satisfied and less motivated than others who have to work harder for what they get. In fact, rather than gratitude, the employee who feels entitled asks: What has the organization done for me lately? Why isn’t it doing more?
Despite convincing evidence that entitlements don’t motivate, companies continue to pay enormous sums for them, every day.
Power Reward Strategy: Reduce entitlements and link as many rewards as possible to performance. Clearly the traditional "pay for loyalty" systems in most organizations need to be changed. Don’t let attendance be your major criterion for rewards. Most employees resent those who only put in their time and yet receive the same reward as those who go the extra mile. Today’s employees have higher expectations for what work can and should be, and they want to receive rewards that reflect their personal efforts and contributions.
This is why so many companies are moving toward performance-based rewards, including performance bonuses, gainsharing and nonmonetary recognition. Although not a panacea, companies are finding that these new reward systems do allow them to give substantial rewards to those who really deserve them. Smart organizations are looking for opportunities to reduce across-the-board entitlements, and thereby find more resources for discretionary performance-based rewards, without increasing the total cost of rewards.
Problem #4: The wrong things are rewarded. Although performance-based rewards are certainly a desirable component of any rewards system, they won’t be effective if the wrong performances are rewarded.
Rewarding the wrong things is certainly not something an organization does on purpose, but it occurs more often than you might think. Here are some examples of disastrous results that occurred because companies rewarded the wrong types of performance: A pizza delivery company focused its rewards on the on-time performance of its drivers, only to discover that it was inadvertently rewarding reckless driving. An insurance agency that rewarded sales agents for the number of call made ended up with fewer sales – and a much larger telephone bill. A manufacturing company that rewarded maintenance mechanics for "wrench time" (the amount of time spent making repairs) was actually punishing them for time spent analyzing problems and performing preventive maintenance. A freight company that based its rewards on the number of containers shipped thought productivity was skyrocketing until an internal audit revealed that only 45 percent of the containers were being shipped full.
In other companies, such things as seniority, conformity, looking busy and not making waves are rewarded, rather than superior performance. In one prominent company, which is consistently rated as one of the best companies to work for in America, employees disdainfully refer to themselves as "The Get-Along-Gang", reflecting the perceived overemphasis in the reward system on interpersonal skills and team player attributes. Sadly, it does seem today as if employees are being rewarded more for how "housebroken" they are than for their performance.
This brings me to two of the most egregious examples of rewarding the wrong things: the all-too-common practices of rewarding free-spending managers with increased budgets the next year (while those who are thrifty get their budgets cut) and of letting employees exceed expectations by setting low goals and playing it safe.
Under these conditions, it doesn’t take long for employees at all levels to figure out that some actions pay off more than others, even though they might not be the right actions. Many managers who complain that their employees aren’t motivated might find that the real problem is that their reward system is rewarding behaviors and results other than the ones they really desire.
Power Reward Strategy: Troubleshoot your reward system to make sure that what it is rewarding is what you really want to happen.
The Law of Rewards – "What you reward is what you get" – Is extremely powerful. No matter what your orientation materials or job description might say, it is the rewards your organization gives that communicate the real expectations.
The most important question to ask in evaluating the reward system in your organization is, Do the rewards we are giving elicit the performance we want? Start with the results you want to achieve and then pinpoint the types of behaviors needed to achieve them. For example: if you believe teamwork is going to get you the results you want, make sure you reward teamwork, and not internal competition between departments. If you want quality, make sure that productivity isn’t over emphasized. And, if you want long-term solutions, don’t reward quick fixes.
Also, don’t confuse employees with too many rewards. It is better to focus rewards on the critical few behaviors and results, rather than diluting them by rewarding the trivial many.
Problem #5: Delay. Research is very clear on this matter: Delay discounts any reward. The high cost of delay is dramatically illustrated by an experiment in which employees in one organization were offered $100 immediately or $500 a year. An overwhelming majority of employees chose the $100 – even though they could have increased their payout by 500 percent by waiting.
In most companies, rewards do not occur promptly. Managers with a longer time perspective expect rank-and-file employees to have the same long-term time horizon. For example, profit-sharing payments are usually delayed until several months after the end of the fiscal year. Deferred compensation plans (like ESOPs) might look good on paper, but most of them do not have the desired impact because the payout is so delayed, and its value is dependent upon so many factors beyond the employee’s control. Even the most basic forms of recognition are often delayed until something significant enough happens.
Power Reward Strategy: Reward promptly. Rewards should be given as soon as possible after the performance has taken place. This is why the most successful gainsharing programs pay employees monthly, rather than quarterly or annually as in the past.
There is a well-accepted law of behavioral psychology, that if you want someone to repeat a behavior, you should positively recognize it immediately. From this law, smart supervisors and managers can learn a vital lesson: Look for any employee doing something right, right now, and recognize it.
Apropos to this, here is my favorite reward story: When a senior manager in one organization was trying to figure out a way to recognize an employee who had just done a great job, he spontaneously picked up a banana (which his wife had packed in his lunch), and handed it to the astonished employee with hearty congratulations. Now, one of the highest honors in that company has been dubbed the "Golden Banana Award".
Problem #6: Generic rewards. Too many reward system are inflexible, and do not acknowledge individual differences. Organizations have tended to assume that one size fits all.
First of all, people are different. Second, there is no question that today’s employees are different from those of a generation ago, and consequently, they require a more individualized approach to motivation.
The Golden Rule – "Do unto others as you would have them do unto you" – doesn’t work for all employees. Slightly modified, the new Golden Rule of Rewards is: "Give unto others as they would have you give unto them".
Power Reward Strategy: Give employees a choice of rewards. Rewards are as different as the people who receive them and it doesn’t make sense to give rewards that recipients don’t find rewarding. For example, some people prefer more pay, while others prefer more time off. A promotion might be more rewarding to one person, while a job-sharing arrangement might be more rewarding for another. Some people are excited about sports events, others about movies. Some employees would love a dinner in a romantic restaurant, others a book by their favorite author. Food, fun, education, improved work environment, gifts, travel, family-oriented activities – the options are endless.
How do you know what will be rewarding to employees? Ask them. Smart organizations are also letting employees choose their own rewards from reward menus and catalogs. Personalizing rewards shows that a company cares enough to discover what "interests" each employee, rather than just distributing generic items. It also reduces the following danger: In one organization I was visiting, an employee opened a big drawer in his desk and disdainfully showed me all the "worthless trinkets" he had collected over the years.
Problem #7: Short-term impact. Another major impediment to the motivational effectiveness of rewards is the short-term impact that most rewards seem to have. Pay increases have a motivational impact of less than two weeks, and other types of rewards suffer from this phenomenon as well. Practically any reward can create a momentary surge of energy. However, these bursts of energy rarely last. In fact, soon after a reward is received, there is typically a motivational letdown.
Furthermore, because most rewards are one-shot events, given at the back end of achievement, they do little to generate excitement for future accomplishment.
Power Reward Strategy: Increase the longevity of your rewards. This can be done in a number of ways: One of the keys to reward longevity is symbolism. The more symbolic an item is of the accomplishment, the more likely it is to continue reminding the employee of why it was given. For instance, a T-shirt of coffee mug with a meaningful inscription will continue rewarding those who wear it, or use it, long after its initial receipt. There are many tokens of appreciation I still keep on or near my desk that remind me of the joy of past accomplishments, while the monetary rewards I have received are long spent and long forgotten.
Another way to increase the longevity of rewards in your organization is by using some kind of point system. Rather than rewarding each individual behavior or accomplishment, points can be awarded, which employees can accumulate and eventually trade for items from a reward menu or gift catalog. This keeps the anticipation of rewards fresh for longer periods of time. It also addresses the need for reward individualization.
One company that designs motivational systems offers an electronic debit-card system to help larger clients cope with the complexity of distributing, tracking and redeeming employees’ points. Employees can use their points to purchase virtually anything they want, from sports equipment and clothing to automobiles and overseas vacations. They only caveat for such programs is to make sure that the recognition value of the rewards isn’t lost because of the impersonal nature of the technology.
One company uses a game it call Safety Bingo. All employees receive a weekly bingo card. When an employee is observed working safely, a number is presented (immediate recognition). When they get "bingo", they receive a safety jacket (along with appropriate verbal reinforcement). The rewards escalate for subsequent wins. This type of program keeps employees interested for long periods of time, even though there might be weeks or months between rewards, and makes routine work more fun overall.
Interestingly, when researchers have investigated the motivational dynamics of these workplace games, they have found that the major motivator is the playing, not the prize.
Problem #8: The presence of demotivators: Nothing has done more to undermine the effectiveness of rewards than demotivators, nagging organizational practices and conditions that frustrate employees and detract from the motivational effectiveness of any reward. For example, how excited can employees get about rewards when the organization is going through traumatic layoffs? Or, how well rewarded will employees feel when poor performers get virtually the same pay increase as the excellent ones? Or, how do you think a senior professional (who just happened to be a woman) felt when she received flowers on Secretaries’ Day?
Virtually every employee in America is offended by privileges given to some and not to others and by obscene compensation arrangements for some CEOs who get paid millions of dollars a year for managing companies with mediocre performance, while excellent employees in those companies are paid only a few dollars more than those who just get by. Furthermore, many employees perceive that American managers often expect sacrifices from them, while insisting on retaining their own privileges and perks.
From the average employee’s viewpoint, the major demotivator present in almost every reward system is unfairness. This is because people tend to be more sensitive to what they are not receiving than to what they are. Fairness is a comparative concept. Workers inevitably will compare their compensation packages with those of others, both inside and outside the organization. No matter how high the absolute amount, employees find discrepancies between their rewards and those of others in comparable jobs to be extremely demoralizing. Rewards offered in the presence of demotivators such as these are often greeted with cynicism and contempt, rather than gratitude.
Power Reward Strategy: Be continually vigilant of demotivators that may undermine your organization’s best efforts to provide power rewards, and reduce them promptly.
Most demotivators can be dramatically reduced by soliciting employee involvement in identifying highest-priority demotivators and by enlisting top-management commitment to support their reduction.
It is probably self-evident that considerable sensitivity is needed in the administration of any reward system. One demotivator that is probably endemic in any reward system modification (especially as an organization moves from entitlements to more performance-based rewards) is a sense that something is being taken away. Employees need to be educated about the reasons that this is being done, understand the ultimate benefits to them and the organization, and should probably have some input into the change process.
To avoid the perception of unfairness, it is important, first and foremost, that the process for allocating rewards is viewed by employees as being impartial. This requires an objective measurement system that few organizations have. Without such objective measurement, any reward system is probably destined to failure.
Although rewards are only one part of the overall motivation puzzle, they are nevertheless a very important part. When handled skillfully, rewards can be a pivotal element in unified, strategic approach to organizational motivation. However, as we have seen, when handled poorly, rewards will continue to frustrate employees and drain organizational resources. Just as with other organizational systems, motivationally transforming the reward system in your organization will require looking at it with a fresh, new perspective.
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