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Why reward and recognition better engage employees than monetary bonuses

There is always debate as to which methods are most effective in improving employee engagement. From the point of view of some employees and employers, the promise of monetary bonuses for stellar performance and achievement seems like the biggest factor that would drive engagement. However, the truth is that most employees become better engaged in their work through non-monetary factors, including reward and recognition. Let’s take a look at some of the key reasons as to why this is the case.


Monetary bonuses work, but they involve downsides too

Undoubtedly, monetary rewards – including raises, gift cards, and special commissions – have a solid track record in terms of boosting levels of employee engagement and motivation. So it’s important for employers to make sure that monetary rewards are part of their employee engagement strategy. Nevertheless, monetary rewards should not be relied on in order to engage employees. Firstly, most employees already expect certain monetary rewards (e.g. annual raises) when working for a company on a long-term basis, while in some industries (e.g. sales), monetary rewards like special commissions are also expected. For this reason, employees need an extra level of recognition that highlights their value, sustaining or increasing their engagement as a result.

When employers focus on monetary bonuses, this can prove more costly to the organisation than an effective reward and recognition programme. Another downside to monetary rewards is that they can encourage conflict in the workplace and feelings of bitterness. This can, in turn, affect team morale, which we all know is central to employee engagement. A further issue with monetary bonuses is that they can be easily forgotten about, as they simply get lumped in with one’s paycheck.

The benefits of using reward to boost employee engagement

The advantage that a reward can have over a monetary bonus for an employee is that it can be personalised. If you always give an employee a monetary reward for something they’ve achieved, then you put no thought into who the employee is as a person. It creates no emotional connection. It isn’t humanising.

While monetary compensation will certainly be appreciated, it doesn’t necessarily feel as memorable as an experiential reward or a thoughtful reward that is based on an employee’s interests. Some examples of the latter might include helping an employee to fulfil a bucket list goal like skydiving or giving them tickets to see their favourite band. The key to keeping employees engaged is treating every worker as an individual – and a holistic reward strategy can be more effective at achieving this aim than monetary compensation alone.

Recognising employees is key to improving engagement levels

Just like with a reward strategy, employee recognition can be done in a personalised way. This will ensure that employees feel genuinely appreciated, which will lead to greater levels of engagement. One advantage that recognition has over both monetary compensation and reward is that it involves minimal cost. Of course, there will be some cost, time, and effort involved in formulating and implementing an employee recognition strategy. Nonetheless, praise and peer-to-peer recognition – unlike a cash reward or non-monetary reward – are free.

When supervisors take more time to recognise employees for their performance and results, they let employees know that they are valued. A simple “thank you” – either verbalised or handwritten as a note – is often far more humanising than a monetary reward. It is vital for employees to feel both valued and humanised in their work, as it increases job satisfaction, morale, and engagement.

Peer-to-peer recognition should also be leveraged in order to help employees feel engaged at work. When employees recognise each other for their contributions and success, this encourages greater team morale, co-operation, collaboration, and shared values. The problem with manager-only recognition is that it doesn’t always bring employees together and encourage a sense of team spirit, which is why a combination of both peer-to-peer and manager-to-employee recognition is optimal.

But while recognition can improve engagement, it has to be implemented in a deliberate manner. For example, recognition is most effective when it is delivered as close to the employee’s achievement as possible. In other words, don’t wait too long to thank an employee. You can also make sure your recognition programme fosters engagement by:

  • Establishing a recognition team
  • Identifying the positive behaviour you want to reinforce
  • Setting attainable goals for employees (every employee should be able to attain recognition)
  • Acknowledging employees often (consistent recognition is better than sporadic recognition)
  • Tailoring the programme to your company (it should fit the needs and personality of your employees)

Monetary bonuses, along with reward and recognition, is the way to go

An employee reward and recognition programme may be more effective at keeping employees engaged in their work than cash rewards, but this doesn’t mean financial incentives have no place. So long as monetary compensation is consistent and fair across the organisation, then it can be a useful way of motivating employees to go the extra mile. However, given the advantages that reward and recognition have over monetary compensation, it makes sense for employers to also acknowledge their employees in a more human, personal, and meaningful way. It is this kind of dynamic that is paramount to preventing and resolving employee disengagement, as well as helping engaged employees to maintain or enhance their level of focus and commitment.

For more information on how to connect employee recognition with employee engagement, check out our e-book on how to build an effective recognition strategy.

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