How to Run a Strategic Employee Rewards Program

Rewards are more than just cash bonuses, service anniversaries, or the extra day off. Done right, a strategic employee rewards program is a critical part of the overall employee experience.

How are you doing rewards? No matter the approach, there are a few key questions businesses need to ask: How are employees responding? Are rewards helping you meet KPIs? Do they have a good ROI?

Often, it’s hard to track the payback on your rewards program. But with a strategic approach, that can change.

In this article, we’ll cover:

  • Best practices for effective employee rewards programs
  • Employee motivation (and the demotivation factor)
  • Managing a rewards program with technology

Best Practices for Effective Employee Rewards Programs

How do you make rewards effective? Here’s the secret: Don’t use them as a motivator to work towards.

Instead, use rewards to build the four pillars of a great employee experience: connection, meaningful impact, appreciation, and growth.

How? We’ll tell you. Kazoo has done extensive research into the science of motivation and employee rewards to come up with five best practices for experience-enhancing employee rewards:

  1. Give employees meaningful options
  2. Make your program trackable
  3. Tie rewards to real-time recognition
  4. Incorporate team rewards
  5. Let employees reward each other

1. Give employees meaningful options

Variety is the spice of life – and of rewards. Take it from motivation guru Dan Ariely, who conducted a study of Israeli semiconductor workers where he offered different groups different rewards:

  • Group 1 received nothing
  • Group 2 received a cash bonus
  • Group 3 received free pizza
  • Group 4 received compliments

The end result? The pizza group performed best, with the compliment group coming in a close second. The cash bonus group came in dead last — lower even than Group 1, who received nothing at all.

Does that mean you should never give employees a cash bonus? No. It means this group really liked pizza!

The takeaway: Don’t guess what matters most to your particular employees. Let them choose from a variety of rewards to pick those that are most meaningful (and motivational!) for them.


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2. Make your rewards program trackable

You can’t optimize what you can’t measure. And it’s nearly impossible to measure the impact of a traditional, manual, or ad-hoc rewards program. Think about it — if you give someone a gift card or take them out for lunch, how do you measure productivity, morale, or behavioral change?

A public recognition and rewards platform, however, offers tools for measuring your investment in rewards. Plus, when recognition and rewards are tied to skills or core values, you can track the number of times employees get recognized for a specific skill or value.

You can also track the relationship between the amount you spend on rewards and key metrics like engagement, retention, absenteeism, or productivity. This helps you see the before/after impact of your program.


3. Tie rewards to real-time recognition

Employee recognition is the employee engagement power tool. Unlike a pre-determined bonus, spontaneous recognition for great work isn’t something that an employee can anticipate. It reinforces positive behaviors in addition to driving great results. Plus, recognition builds connections between the people giving and receiving praise.

Investing in a recognition and rewards program shows an employee their impact on a business over time, contributing to the meaningful impact pillar of the employee experience. So support recognition with small employee rewards. It only amplifies the power of both rewards and recognition.


Read more in our guide The Science of Recognition & Rewards

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4. Incorporate team rewards

Studies show that offering team rewards and experiences can produce more engaged, effective individuals. The Journal of Business Research reported that rewarding a team boosted cooperation and performance.

“Group reward systems not only produce superior group performance – in most cases, they also produce the best performing individuals.”

Connection to the team is a big factor in how much employees engage with their jobs. Rewarding the team, or including team experiences as a reward option, can impact your organization in ways that rewarding individual accomplishments cannot.


5. Allow employees to reward each other

When combined, peer-to-peer recognition and employee rewards are incredibly powerful. While everyone likes to be rewarded by their manager, knowing peers respect you is equally motivating. Plus, if managers know about peer recognition and rewards, it grants them extra insight into what the team is doing well.

In one social science study, sets of employees were either given direct rewards, or given rewards to give to other teammates or a charitable organization. Here’s the twist: The group that got to give away the bonus substantially outperformed those that got the direct bonus.

The takeaway? Empowering employees to reward each other encourages higher performance.

Employee Motivation (and the Demotivation Factor)

Done wrong, an employee rewards program acts as a surprising demotivator. And working for a reward itself (rather than the joy of a job, or working based on a set of values) can cause serious harm to a company.

Take the old story of a Soviet Nail factory:

Leaders wanted to improve worker performance. So they started paying the workers based on the total weight of nails produced. After a while, the company noticed that nails were becoming bigger and bigger. So they decided to start paying employees based on the number of nails produced — at which point the nails became smaller and smaller.

The point? Offering rewards with a “tit-for-tat” approach can yield wasted effort and resources. Human behavior author and lecturer Alfie Kohn summed this idea up well when he said: “Do rewards motivate people? Absolutely. They motivate people to get the rewards.”


Need inspiration?
Download our list of 40 Out-of-the-Box Reward Ideas

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Managing an Employee Rewards Program with Technology

Kazoo’s Employee Experience platform pulls together rewards, recognition, and actionable insights under one powerful umbrella.

Our ROI report showed that every company surveyed had a boost in engagement after implementing Kazoo, the cost of employee rewards programs decreased by an average of 30%. Plus, it saved an average of five hours per month in HR program management.

Ready to reimagine your rewards program? Learn more about our product or book a personalized demo to learn how Kazoo can help you.

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