How to Navigate the Relationship Between Recognition and Reward
Being recognized for hard work feels good. And it can feel even better when financial compensation is part of that recognition. But the choice to tie recognition to compensation depends on leadership, individual preferences and organizational culture.
When individuals move the needle on the organization’s goal or bottom line in a way that generates profit, “it’s appropriate that it could translate back into a financial incentive for the employee,” said Ryan Aguiar, a consultant at Gallup.
While this type of recognition is usually done via annual or semi-annual bonuses, Gallup recommends managers also give employees feedback as frequently as every seven days, tying individual performance back to the company’s values and goals.
These frequent touchpoints can take on different forms: public recognition via award or commendation, private recognition from a peer or boss, promotion or increase in work responsibility and monetary award in the form of a prize or pay increase.
Motivations at Work
Providing one type of recognition can help an organization, but a diverse program will have more depth and impact, said Tanya Bhatia, talent management specialist at Link Logistics.
She advised leadership to ask, “How can we get people excited about working here?”
“It’s always nice when you get a random email from up the organization, shouting you out,” Bhatia said. “Just those little bits of — for lack of a better word — dopamine hits. It can be as simple as a pat on the back from your manager. Just as long as you feel that your work is being recognized, I think it keeps you more engaged with the organization.”
Organization shout-outs can be kudos for individual employees via LinkedIn or internal newsletters. But in an ideal world, managers would truly understand the team member they’re working with and understand the motivations of the person they lead, Bhatia said.
Aguiar echoed the need for managers to understand how employees like to be recognized. He said he knows some people who love to be recognized in front of peers, and others who are horrified at the idea of being presented in front of a group; they become bashful or embarrassed.
“It’s important to figure out what those individualized needs are for each one of your teammates, and being able to proportionally provide that to each one of them is a key that makes a leader great,” Aguiar said.
Related Article: Employee Recognition & Rewards Buyer’s Guide
Meaning vs. Money
While different individuals will want different forms of recognition, the type and frequency of recognition can also be informed by generation. According to a Gallup and Workhuman study, “younger employees are more likely to say they want frequent recognition than older employees.”
The survey found that Gen Z and younger millennial employees are 73% more likely than baby boomers to say they want recognition at least a few times a month. Meanwhile, Gen X and baby boomers are more likely to say that they do not want recognition.
Aguiar said that while some individuals prefer financial compensation as a form of recognition, particularly among older generations that have experienced more financial downturns in their careers, a growing number of employees are instead favoring work that makes a difference in what they care about. In fact, more than nine out of 10 employees in a Meaning and Purpose at Work report indicated their willingness to give up part of their earnings for more meaning in their work.
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Doing mission-based work “really drives engagement,” Aguiar said. “It translates to financial incentives to the bottom line, which hopefully translates to the individual as well.”
Related Article: How to Align Employees to a Broader Purpose
Recognition Comes With Its Challenges
While there are benefits to recognition — whether or not it involves financial incentives — there are also some challenges to keep in mind.
If employees feel that they’re not recognized at work, they are likely to think the company has favoritism and that recognition is a “popularity contest,” according to the Great Place To Work Trust Index.
Bhatia said recognition is a double-edged sword: it can create unhealthy competition or it can send a signal to peers that they’re capable of great things, too. "That really, truly relies on management and how executives act amongst each other,” she said. Silos, team competition, individual competition or favoritism can change the environment and how the recognition is received.
Another challenge around recognition is lack of awareness from managers that it’s something they should do. This is due to poor training, Bhatia said. “Sometimes, managers don’t even know how to give effective kudos.” Giving recognition during one-on-ones versus team huddles versus organization-wide meetings really changes the weight of that feedback, she said.
And when recognition is accompanied by compensation, it can set an expectation for future awards. Then, any recognition that comes without a financial incentive may feel hollow and lead to a decrease in engagement, Aguiar said. “It’s setting an expectation, and then you have to maintain the expectation.”
This is called a psychological contract — or unspoken expectations established between employees and employers. “The second that becomes violated, [employees] become so much more disengaged than if the expectation had been set accurately to begin with,” he said.
Communication and transparency are key to maintaining engagement and preserving that psychological contract, said Aguiar, particularly in moments when bonus expectations cannot be met.
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