Many companies have rewards programs to recognize employees for their efforts and attitudes. But how well do these attempts to reward—and generate employee engagement and loyalty in return—actually work? Are homegrown, internally managed programs more meaningful than the online options so widely available these days?
Another important question: What do employees really think about these programs, and how could yours be made more meaningful?
The Role of Rewards
Joblist, an AI-powered jobs search platform, surveyed over 15,000 people for its
Q3 2022 United States Job Market Report and asked them to name the top drivers of engagement at their companies. The most common responses were:
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Money (cited by 64 percent of respondents).
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Pride in doing a good job (also 64 percent).
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How they are treated by their employers (61 percent).
Despite those drivers, however, when respondents were asked whether they were planning to quit their job in the next six months, a significant percentage from each generation was considering a move to another employer:
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Baby Boomers (40 percent).
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Generation X (27 percent).
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Millennials (40 percent).
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Generation Z (44 percent).
Rewards can help, but only if they truly
feel like a reward.
Global research by Gallup and Workhuman, based on a February 2022 survey of 7,636 employees in the U.S. and additional respondents in western Europe, examined what recognition means and whether employees "feel they are receiving it authentically, equitably and frequently enough."
Leaders recognized that there are actions they could take, but aren't currently practicing, to make their rewards feel like a reward:
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Making recognition a strategic priority (81 percent of leaders say it is not).
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Offering leaders and managers training in employee recognition (73 percent do not).
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Having a budget allocated to recognition (nearly 66 percent do not).
High Tech and High Touch
Effective rewards programs require personalization, whether or not part of the program is automated.
Both automated rewards platforms and homegrown programs can work, said Jesse Sacks, head of people, talent and operations at Haystack Team, an intranet rewards platform based in Los Angeles. However, "no rewards program generates loyalty or engagement independently," he said. "If that were the case, the engagement crisis we've been talking about for a decade or more would be over."
Some software-as-a-service (SAAS) systems can make it easier to put the right conditions in place and make administration practical at scale, Sacks said, "but whether any rewards program 'works' or not boils down to the culture and conditions it's applied in."
Jennifer Strauel, chief people and diversity officer at Arrivia, a technology company based in Scottsdale, Ariz., that works with organizations to design incentive structures, said that what works depends on the organization and its culture, needs and budget.
"The cost of an external tool means that fewer funds are available to the employees, and recognition often goes to the same small group that are active users of the tool," Strauel said. Internally managed programs, she noted, allow more of the budget to go directly to employees, "and a governance committee can ensure a more equitable distribution of rewards by manually reviewing them before issuance."
At Arrivia, Strauel says, a webpage is used to gather nominations for quarterly Core Value Awards and an annual Top Performer Award. Winners are selected by the senior leadership team and awarded cash for use on their platform or a group cruise with company leaders.
The company also has a "Cheers for Peers" wall in each of its offices to allow notes of appreciation to be posted for employees at all levels. "We then enter completed cards into periodic drawings for travel awards like resort stays," Strauel said.
Adding Personal Touches
While automation can provide benefits for employers, it's also important to ensure that no matter what tool is selected, the process doesn't stray too far to the tech side and risk becoming too impersonal or generic.
Unfortunately, this is where many organizations are falling flat. Recognition, Gallup found, has the most impact when:
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It fulfills employees' expectations and needs—but only 23 percent of Gallup's respondents strongly agree that their program does.
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It's authentic—but only one-third strongly agree that it is.
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It's equitable—but only one-quarter strongly agree that it is.
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It's embedded in the culture—but only 19 percent strongly agree it is.
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It's personalized—but only 10 percent strongly agree that it is.
These findings suggest that relying solely on technology to drive your rewards programs isn't likely to create the level of personalization that will really resonate with employees.
But, determining whether to automate or be more personal in your rewards programs isn't, or shouldn't be, an either/or decision. When deciding what will work best for your organization and your employees, it's important to consider their needs and yours and determine where the appropriate intersection may be.
Making It Meaningful
It's important to ensure that whatever program or process you use includes some level of personalization.
Scott Lieberman, founder of Touchdown Money, a firm based in Palm Beach, Fla., that helps companies grow their online businesses, explained: "Once you remove the emotion from your reward program, as some SAAS platforms do, it becomes a game. Yes, games can be fun. But winning a game isn't the same feeling as earning specific and heartfelt praise from a supervisor along with a meaningful reward."
Lieberman likened this to the experience many have on Facebook when a friend you haven't spoken with for a while is notified by Facebook that it's your birthday and posts a celebratory emoji. "Compare that to your other friend who remembered on their own and sent you a message asking how you're doing, wishing you well and recalling a fun time you had together," he said.
Ultimately, though, Sacks said, "neither a homegrown nor SAAS option is inherently more meaningful. SAAS tools take a lot of the guesswork, busywork and scaling issues out of the equation, but they're not magic. Homegrown reward programs benefit from a personal touch, but they won't transform the employee experience if they're not administered or structured effectively. Most importantly, both options require an organizational culture and environment worth engaging with."
They also require an understanding of what employees value.
Understanding Employee Preferences
"Just like any product provider, you look to your market and determine their wants, needs, desires and dislikes," said Jasmyn Farris, chief people operations officer at iSeatz, a loyalty technology company based in New Orleans.
"For many organizations—and especially those that are remote-first—a SAAS-powered online option is scalable and effective at almost any headcount," she said. "For other organizations, the homegrown approach may be a more organic and affordable option that aligns more closely with their culture or budget."
Anthony Martin, founder and CEO of Reno, Nev.-based Choice Mutual insurance agency, agreed that "reward programs are not a one-size-fits-all solution, so we modify them to suit our employees' needs." small companies have an advantage in understanding individual employee preferences, he noted.
A 'More Human' Approach
"We don't plug information into a program and let a computer do the work," Martin said. "We take a more human approach to rewards programs, which allows for interaction between leadership and team members. This shows employees that you are listening to them and care about their needs."
For example, he noted, some employees like to be publicly recognized, so they're included in company newsletters and social media shoutouts. Others prefer a little extra time off after completing a particularly difficult task.
"Being able to modify rewards for your employees keeps everyone happy and motivated," Martin added. "Your team knows they are being thought of as a person, not as a cog in the machine."
At Arrivia, Strauel said, "we continually monitor employee feedback through surveys, focus groups and other methods to ensure that our reward and recognition programs are resonating with employees or if they need to be modified."
Keeping Rewards in Perspective
Ultimately, whatever approach is taken, the role of rewards needs to be understood in the larger context of the workplace, Farris said.
"Reward programs are a single tool in a much larger strategy to generate engagement and loyalty through employee recognition, which is imperative to a healthy organizational culture," she said. "Making employees feel appreciated and proud to do the work they do is what really drives engagement and loyalty. Being rewarded with a $25 gift card to their favorite coffee shop is just an added bonus."
Sarah Deane, CEO and founder of MEvolution, a science-based personal development system, agreed.
"Great reward systems can be in place, yet organizations may see less-than-desirable engagement, productivity or retention," she said. This can happen, she added, when other areas of the employee experience are falling flat—"for example, continuous unsustainable workloads, less-than-ideal employee well-being resources, feelings of isolation or work that an employee doesn't feel connected to."
Lin Grensing-Pophal, SHRM-SCP, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues.