A Comprehensive Guide to Reward and Recognition in the Workplace

Posted in : HR Updates on 11 January 2017
Craig Thompson
Vibrant Talent Development
Issues covered:


The Traditional Approach
Intrinsic and Extrinsic Motivation
Work that Matters
Maslow and the Impact on Engagement
Reward v Recognition
How Much Should We Spend?


We’ve all felt, at times, that no matter what we do somebody will inevitably be unhappy. Despite our best efforts to come up with schemes that please everyone, oftentimes we end up pleasing no-one. Being tasked with finding ways to reward and recognise our hard working staff seems like a lovely challenge on the surface but once we start to delve into it that we realise it’s not as easy as it seems on paper.

As human beings, we’re all complex individuals shaped by many things like our upbringing, experiences and the company we keep. Each of us has been moulded in different ways and the circumstances within our lives are forever changing. What each of us finds rewarding changes from one person to the next and just to make it even more difficult it changes over time too depending on our circumstances and needs.

That said this is still a fantastic challenge to have and it is possible to implement solutions that workforces will unite behind – the key is inclusion and communication.

worthwhile work quote

We often shut people out of the real discussions in our business – whether it’s conversations around employee benefits and compensation, shift patterns, staffing levels or even how to plan social activities WE make the decisions that matter most to our workforce and then we tell them what conclusion we’ve reached. We don’t even tell them why. Is it any wonder people get resentful?

In a perfect world, the ideal scenario is to find ways to involve our workforce in finding solutions to problems we’re encountering.

Exercises like Edward de Bono’s 6 Thinking Hats are a great tool for encouraging parallel thinking about a problem, getting everyone to critique the situation from all perspectives and then come up with solutions.

why people buy into solutions they came up with

Of course, not everybody can be involved in meetings to propose solutions to problems, but what we can do is request representatives from each area of the business to bring forward feedback and ideas from their teams.

Surveys are another option but unfortunately, their reputation has been tarnished and often surveys don't work. All too often the important questions aren’t asked, key findings aren’t released and changes never happen off the back of corporate surveys. What’s worse than that, though, is that facts are sent out by e-mail or if we’re lucky we get invited to a briefing; but that’s just one-way distribution of information. There’s rarely an open dialogue about hot topics.

change as a result of feedback

When issues are brought to our attention through surveys or other forms of feedback solicitation we should talk about them together, decipher where they’ve come from and when we can’t do anything about them at least explain why we do things the way we do. People should always be encouraged to share better ideas with us if they know of any. Often the people with the best solutions to problems are the ones who face those problems every day; the ones we listen to and open dialogue with the least.

The Traditional Approach


workplace compliment cartoon

Traditional managers often feel that a paycheque and employment is in itself enough recognition and reward for an employee to be satisfied at work. “Because they’re paid to” is often the response when managers of this ilk are asked why people would be motivated to help the company achieve its objectives.

Let’s not forget, though, we’re not just trying to achieve staff satisfaction, we’re aiming for engagement; not the same thing. People can be happy in a job where they're able to fly under the radar without actually doing much. This is called presenteeism and is said to cost a business more money each year than absenteeism. Engagement requires the employee to be committed to helping the company achieve its goals. For that reward and recognition are key.


When we look past the traditional mindset and start to realise we need to give more back to our people if we want them to give back to us our first thought is often to look towards financially based incentives.

Much like the inept romantic who tries to placate their partner by showering them with materialistic gifts rather than genuine affection, or the parents with the spoilt child who wants for nothing, we rely on these incentives to get results and they don’t have the intended outcome in the long term. How many spoilt kids do you know that are the best behaved?

drawbacks of using incentives in reward and recognition

Then when we are under pressure and have a need to motivate people for a challenge or a deadline we lose the impact of incentives because people are de-sensitised to them; therein lies the problem with Transactional Leadership. If incentive schemes are ever-present they lose their impact.

The approach is flawed and we become schemers trying to motivate people with our own solutions. The problem here is that motivation comes from within and is based on a variety of personal circumstances including wants, needs, past experiences, relationships, beliefs and current circumstances. What we the schemers decide to impose on people as rewards to motivate them are actually what we ourselves find rewarding based on our own values, beliefs and circumstances; other people may not feel the same.

It’s also been proven that financial incentives like commissions actually serve as a distraction and only work in a very small set of circumstances. When the task being completed is one of a menial ‘tick-box’ nature requiring very little thought people can focus on the incentive and work quickly to acquire it. But when skills like creativity or problem solving are required and the solution is not obvious, time after time results from groups studied have demonstrated that the incentivised group’s results are inferior.

mechanical v cognitive skills and performance

Intrinsic and Extrinsic Motivation

It seems crazy to think that an incentivised group’s work would be inferior and slower to that of a group receiving no reward for completion. The rationale may lie within the notion of intrinsic and extrinsic motivation.

mastery of work

People can and will be both intrinsically and extrinsically motivated and the balance of each will change depending on their circumstances, who they’re working with and what they’re working on.

Extrinsic motivation is effectively what logical/ rational/ tangible things can happen to us externally that validate our efforts. Gamification is a good example of a system based on the principles of extrinsic motivation whereby workplaces use game-like dynamics to create friendly competition within the workplace and chart progress with scores and prizes.

Intrinsic motivation, on the other hand, is more about our emotions and how we feel within; that sense of a job well done, being really good at something or working on a meaningful project can stir feelings of self-value and encourage us to do our best.

The interesting part comes when we’re already intrinsically motivated by something and someone tries to apply extrinsic rewards to it. Studies have shown that the extrinsic rewards become a distraction and damage the individual’s drive and effort because something they already found great value, purpose and potentially joy in has now been turned into something more like work that they’re being made to do.

This could help to explain why incentivised groups’ work is often inferior.

Work that Matters

People want to do work that matters and they themselves want to matter to the company they work for and the people they work with. Those are the circumstances people find most rewarding and it comes down to the great sacrifices they make for their employers for what can feel like meaningless duties.

It’s said that we dedicate over 100,000 hours of our lives to our employers and since so many of us do that without ever seeing the bank balance change significantly (at least not in our favour…) and missing out on our dreams and families lives it’s easy to understand why people feel resentful.

Changing the deep-rooted problems within our Capitalist society may be a challenge too far for today, but the conundrum we can tackle is how we can show people the value of their work and make them feel like they matter to us. Unfortunately, this requires both creative thinking and two-way communication; two things the traditional manager following orders and enforcing rules isn’t so good at.

By asking questions and equally importantly paying attention to the answers we learn a lot about people; instead of just introducing soulless reward/ bonus schemes.

annual performance reviews cartoon

The best way to reward or recognise people is to get to know them, understand their wants and needs, care about them and strive to help them achieve their own objectives too.

company objectives and the employee relationship

Peoples’ objectives will change person to person as much as they will generation to generation. Objectives are based on circumstance so while it’s easy to get carried away with boxing people off as Millennials, Xers or Baby Boomers it’s far better to ask than to assume what will make employees happy.

Too often the flaw in the plan is the one size fits all solution where we assume the same thing motivates everybody. That’s simply not true, an extra day off or the option of flexible working may mean more to a new parent than the financial incentive that may whet the appetite of someone saving for a holiday. Having said that the new parent may need the money the financial incentive brings and the person saving for the holiday may want more time off for it! In addition, any of us can get to the point where we’re bored in our job and want to learn something new and challenge ourselves. Maybe at one stage, it didn’t suit us to work our way up the career ladder but as our circumstances change so do our wants and needs.

There’s no mystery behind it all, though, we simply need to have strong relationships throughout the company with managers who understand and care about their teams. That has to be a culture that runs right throughout the organisation and if we want our team managers to care about their people they need to have felt the same care themselves; otherwise why would they bother?

richard branson - success in business is about people people people quote

Maslow & the Impact on Engagement

On that point of understanding people, it’s appropriate to take a look at Abraham Maslow’s Hierarchy of Needs. Maslow was a researcher and pioneer in the field of psychology in the 50s and his hierarchy was the result of his efforts to synthesise a large amount of information concerning research on human motivation. In other words, the hierarchy was Maslow’s way of making sense of what motivates people to do the things they do or behave the way they do.

The hierarchy says that we each have a series of levels of needs that must be met and will determine where our focus is and thus how we behave. A fundamental premise of the hierarchy is that the lower level needs must be achieved before we can focus on the next; our primary concerns will naturally command our attention.

The ultimate position in the hierarchy ‘Self-Actualisation’ is a level that we may reach at times in our lives but there are many factors that influence our ability to stay there and how long for. Self-Actualisation is finding an inner purpose; what really drives and motivates us and allows us to fulfil our potential. Self-Actualisation is not what we do as a result of our need to cope or survive but what we do because of passion.

Most of us working in HR or L&D have seen Maslow’s Hierarchy many times but how often do we actually take the time to consider the ramifications our actions and decisions as employers have on our employees’ lives and in turn their engagement with the company?

maslow's hierarchy of needs

It really is self-sabotage because what we want is people at the self-actualisation level of the hierarchy where they’re focussed on achieving great things, but we handicap them by the career experience we offer. We take the short-sighted approach that we should pay people as little as we can get away with; as long as we’re still able to hire staff why would we offer more? The same goes for benefits and perks to the role and so relationships between managers and team members suffer. We build a poor career experience by being cheap and then wonder why people leave.

presenteeism, performance, attendance, customer retention and staff retention

We get away with these poor career experiences to an extent depending on the state of the job market. In an employer-driven market (lots of job-seekers with few opportunities) candidates will jump through hoops to get the job and they’ll accept poor packages. Why? Because they’re primarily focused on fulfilling their ‘Survival’ and ‘Safety/ Security’ needs. They need to be able to feed themselves and they need to have a roof over their head so they do what it takes to ensure that happens.

Companies get off on this and think it’s great they can save money; but are we left with a loyal workforce that gives it's all to ensure the company is successful? Or do we have a bitter workforce that resents how hard they’re expected to work for little more than the ability to survive? This is when we find ourselves cracking the whip trying to motivate people who come to work and fly below the radar while using company time and resources to look for other jobs. So on the surface it seems like a cost cutting exercise, but, in reality, we’re costing ourselves a lot more.

Each level in the hierarchy impacts on the next too so if we don’t get the basics right everything else can be affected. Compensation and benefits can help to address peoples’ ‘Survival’ and ‘Safety/ Security’ needs, but if those things aren’t there then relationships (both in work and outside) become strained through things like resentment, stress and frustration; therefore ‘Love & Belonging’ and ‘Self Esteem’ become issues too. At this stage, people are in turmoil, therefore, the last thing they’re thinking about is taking chances, creativity or the needs of the company.

Thinking about, identifying and understanding where people are on the hierarchy can help us comprehend what might motivate them. But still, the best thing to do is to ask and work with individuals to help them find their motivation rather than assume.

Reward vs Recognition

So, given all of the above, what is the difference between Reward and Recognition anyway and which is more powerful? Reward and Recognition are terms that are often used together and interchangeably but to understand them and use them effectively we need to consider them separately.

Rewards are rational, short-term and based on budget. Rewards are frequently, but not always, financial or they at least have a financial cost to the company. Rewards are often based on what we can do for or give to other people to motivate them to keep performing to a certain level or higher (extrinsic). Financial rewards predominantly tackle the lower levels of Maslow’s Hierarchy.

Recognition is an emotional type of reward (intrinsic). As with the saying “People work for people, not companies” recognition taps into our relationships/ connection with those around us and our need for ‘Esteem’ on Maslow’s Hierarchy.

Esteem has two levels – the lower level being the respect we earn from others and the higher level the respect we have for ourselves; which we are less likely to have if we don’t have the respect of others. Therefore recognition plays a big part in helping us to reach ‘Self-Actualisation’. Correspondingly, a lack of recognition can stop us from having the motivation to achieve our potential and do great work.

Both reward and recognition are linked to an idea derived from neuroscience studies that there are two controlling forces that drive our behaviour. These forces are the desire to gain pleasure and the need to avoid pain.

There’s a constant battle that rages inside us subconsciously and it influences every decision we make. That battle is our mind determining how much pleasure we’ll gain by doing something or behaving a certain way while simultaneously considering how much pain we’ll experience and then choosing which one is the better option.

As human beings, we have a built-in need to avoid situations that are going to be painful to us. It’s human instinct to protect ourselves from harmful situations. Therefore we’re likely to be more motivated to avoid pain than gain pleasure. Pleasure is nice and we all need it to some extent, but pain is something that hurts us (physically and emotionally) and society has shaped us since childhood to avoid those situations as much as possible. It does depend on the situation, though; if the pain is not that great then the pleasure may be worth the sacrifice.

Think back to when you were a kid with homework to do but you wanted to play with your friends or watch TV. Playing or watching TV brought you pleasure and that was a powerful motivator for you right? Simultaneously the prospect of having to sit and study and do the homework assignments seemed like a terrible idea. Missing out on all the other things you could be doing to complete those tough assignments was going to bring you so much pain. Therefore if you were anything like me homework was always put off until it absolutely had to be done (you could, however, have been one of those kids who got a lot of pleasure from school). This brings up an interesting point about short term and long term pain.

Not only are we subconsciously choosing between gaining pleasure or avoiding pain, we’re choosing between what we’re going to be confronted with right now and what we can put off.

reward versus recognition

In the homework example, not completing the assignments was going to weigh on our minds, make us feel guilty and ultimately get us in trouble with our parents and teachers; especially if we didn’t complete it at all or put much effort in. So ultimately we would have both the pain of having to do the homework anyway along with the pain of all those nasty feelings that come with procrastination and possibly the pain of getting in trouble. But that’s the option we went with because missing out on TV or playing with our friends was a more immediate pain and the desire to gain pleasure was more powerful than avoiding a pain that could be put off a while.

Relating this to our working environments, we use rewards and recognition to motivate people because we’re trying to tap into their need to gain pleasure. Both rewards and recognition are pleasurable things. Being given something for doing a good job is nice. Being singled out and praised for doing a good job is also nice. Traditional managers take the opposite approach, trying to play on peoples’ fear of painful situations to motivate them. While it’s true that people are likely to put in a bit more effort if for instance they’re threatened with losing their job, they’re also likely to start looking for work elsewhere. Clearly, they’re not enjoying their work and engaged with the company and the threat of punishment isn’t going to improve that.

In the battle between Reward & Recognition and which is the more powerful, it can be useful to think of Rewards as a type of ‘hygiene factor’. Hygiene is not something you get kudos for having; but, when it’s not there, it becomes a problem. Particularly when people aren’t well compensated as it is, the lack of rewards or bonuses creates resentment. But having them in place isn’t enough to motivate people. The trick is to make sure that your Rewards are personal, specific, for clearly identified and communicated work, of value to the recipient and not ever-present. That way they will actually mean something. Recognition, on the other hand, should be ever present, on-going and specific as opposed to generic throw away comments like “great work today” that can be applied to anyone.

both reward and recognition are key

How Much Should We Spend?

Last but not least, how much should all of this cost anyway? The average industry spend on Reward and Recognition programmes is 1 – 2% of payroll. What you should spend is entirely up to your own circumstances and objectives.

The following should be taken into consideration:

  • What are your objectives?
  • If achieved what savings will likely be associated?
  • Are you likely to generate more revenue as a result of the programme? If so what is your forecast?

When you calculate the above, trying to be as conservative as possible, it gives you an idea of what additional funds you’re likely to have available to play with. Decide how much you’re prepared to put behind the project and trial it. Make sure that you take stock of the relevant metrics in advance (e.g. productivity, attendance, staff turnover, recruitment costs) so you can measure progress.

For a couple of final tips:

  1. Involve your people in the creation of your new Reward & Recognition strategy; solicit their feedback and ideas. When people are part of creating the solution they’re much more likely to buy into it, support it, defend it and understand the limitations.
  2. Communicate your intentions and if necessary run workshops so everyone understands what’s available to them. Uncertainty breeds doubt and resentment.
  3. Have open, honest and frank conversations. What is a company beyond the systems and the processes but a collection of people? These people want to be treated like adults and would much prefer to be trusted and informed of any limitations rather than the typical management approach of pretending the issues don’t exist and not talking about them.

biggest incentive in human workplace is doing work that matters

This article is correct at 11/01/2017

The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

Craig Thompson
Vibrant Talent Development

The main content of this article was provided by Craig Thompson. Contact telephone number is +44 (0)7982 7282 10 or email craig@vibranttalent.co.uk

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