In today’s hiring market, it’s critical for employers to motivate employees with incentives and rewards to boost productivity, employee engagement and most importantly, revenue.
Traditionally, jobs used to be more routine based and bureaucratic, with no sign of straying from company rules and procedures.
Young companies have started to challenge the traditional ways of doing business by breaking down the walls of hierarchy, ensuring an open, collaborative workspace and establishing a work environment in which employees are highly engaged and motivated.
Reward systems and programs have become an important tactic in organisations across the globe because of their positive outcomes on organisational success.
We all know that being employed by tech giants like Google comes with many benefits such as lunches made by professional chefs, a vibrant office environment, on-site health and dental care, biweekly chair massages, yoga classes, gym classes and so much more.
At first glance these might be viewed as being ‘just perks’ but, they have a higher purpose and often translate into intrinsic rewards. Google creates this environment where employees feel like their work is making the world a better place and because of that, they are one of the top companies in the world to work for. A recent study found that 73% of Google employees feel that their jobs are meaningful, which boosts employee happiness and efficiency.
This brings us to intrinsic and extrinsic rewards;
But before we dive in, let’s look at the importance of employee rewards.
Why Employee Rewards are Important?
A company’s success is directly dependent on the performance of its employees as employees are their most valuable asset.
Therefore; employee happiness is essential.
According to The Employee Engagement Blog, research states that employees who are recognised and rewarded for their efforts feel happier in general, have better relationships with colleagues, and are more open to constructive criticism.
Employees aren’t the only ones to benefit though.
A study conducted by the Aberdeen Group found that companies that implement employee engagement programs enjoy a 25% increase in revenue yearly, while the sales teams success rate tripled.
That’s impressive, right?
Oracle Human Capital Management surveyed 4,706 employees and found that there are tight links connecting performance, rewards, and recognition.
The survey found that:
- 30% of employees said that unfair pay and insufficient rewards are the top reasons for leaving a business.
- 68% of employees know what’s expected of them, but few believe they are being recognised, appreciated or rewarded for their hard work.
- 46% of employees said their performance is regularly assessed.
- 41% believe that they are compensated fairly.
- 36% reported that they receive rewards for their performance.
In the modern world, employees strive for meaningful recognition, often more than financial incentives.
They look for opportunities to learn, ways to develop skills and want to feel valued. For companies to retain their talented workers, they need to ensure that their employees are happy by providing unique rewards that are aligned with their company goals and resonate with their employees.
This is even more true for millennials who have started to infiltrate the working world. They are easily distracted, don’t want to do mundane tasks and get bored very quickly.
Rewards systems have now become more critical in ensuring the younger generation is engaged, and doing their jobs correctly.
So, it is clear that employees want to be recognised for their efforts and want to be rewarded.
But, what rewards do they value most?
Extrinsic rewards are tangible rewards, usually financial which take the shape of raises, bonuses, and benefits, and are controlled by a supervisor or manager who decides whether or not the reward is granted.
Financial rewards are great employee motivators and is an important consideration for an employee choosing a job. That being said, once the issue of money is out of the way it plays less of a role on a day-to-day basis in keeping employees motivated.
So while it’s ok to dream big and try and emulate the great working environments of the tech giants it is important not to get carried away. Harvard Business Review conducted a study on 2,000 workers ranging from ages 18 to 81 aimed at identifying which factors influenced their decision when choosing between a high-paying job and a lower-paying job with more perks.
The study found that 88% of respondents said they would give better health, dental, and vision insurance “some consideration” (34%) or “heavy consideration” (54%).
The next most valued benefits were ones that offered flexibility and improved work-life balance, such as flexible hours, more holiday time, and more work-from-home options.
These types of benefits make lower paying jobs more desirable over higher-paying jobs. So which extrinsic rewards are important, they aren’t the be all and end all. In order to keep employees engaged and motivated over the long term, you will need to consider the role intrinsic rewards play.
Intrinsic rewards are psychological rewards that employees get from doing meaningful work and performing it well and is something that exists within an individual.
The way work is done has changed.
Employees are required to be more self-managed - to rely on their skills, experience and knowledge in order to meet targets, overcome challenges, and create value for customers.
This requires them to make a number of decisions along the way and when the outcome is positive, employees receive a positive emotional charge, an intrinsic reward. It is the proverbial “pat on the back” that you give yourself once you’ve completed a work task that required a great deal of effort and reflects your ability, competency, growth, knowledge, and self-control.
It is the personal fulfilment of completing a task or achieving a goal that keeps employees motivated over the long term and keeps them coming back for more. According to study.com, employees who are intrinsically motivated tend to strive to develop professionally and are more productive than employees who lack intrinsic motivation.
Intrinsic rewards can be broken down into four categories:
- Sense of meaningfulness - this refers to the value an employee feels they are creating. Is the task at hand important? Is it part of something bigger? Do they feel like it is worth their time and energy?
- Sense of choice - this is whether the employee has the ability to decide what to do and how to do it while trying to accomplish the task. They need to take ownership of their work and have the ability to decide how it is completed.
- Sense of competence - this is when employees have the ability to complete the tasks at hand. It is about meeting and exceeding personal standards as well as the targets and goals set for them. It is the sense of satisfaction from a job well done.
- Sense of progress - this is the sense that an employees effort helps accomplish something. Moving forward and feeling like everything is on track helps to reinforce that what is being done is correct and worthwhile.
- Young companies have started to challenge the traditional ways of doing business by breaking down the walls of hierarchy and establishing open, collaborative work environments.
- Reward systems are incredibly important in establishing a work culture in which employees are motivated, productive and lead to a higher annual turnover.
- Extrinsic rewards are tangible rewards and take the form of raises, bonuses, and benefits.
- Intrinsic rewards are the personal interest or enjoyment one experiences from a job and include things such as feelings of accomplishment, growth, individual achievement, etc.
- Extrinsic and intrinsic rewards are essential to employees and play a vital role in the success of the organisation.