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Employee reward versus employee recognition - which is best for improving employee engagement?

What is more effective for employee engagement; reward or recognition?

Reading Time: 4 minutes

You know that there are numerous benefits to a highly engaged workforce, but figuring out how to grow employee engagement can be a bit of a head-scratcher, right?

Like any major workplace policy, figuring out what to focus on when improving engagement is a case of looking at the best options and running a cost/benefit analysis if you can’t do it all.

With that in mind, we’ve broken down two of the most common methods focused on by organisations looking to increase employee engagement; employee reward versus employee recognition – FIGHT!

Employees need to feel valued at work

How valued an employee feels in their role can massively impact their ability to engage effectively. If a paycheck was all that was required to make employees feel valued, 85% of employees wouldn’t be unengaged or actively disengaged at work.

In our employee engagement guide for HR directors, there are ten key factors of employee engagement. Many of them can be seen as reflections of how much an employer values their staff, but three in particular are direct indicators: Pay/benefits, visibility, and recognition. Like engagement as a whole, recognising the value of employees is vital for retention.

In a study from SurveyMonkey and Bonusly of 15,00 employees, 82% considered recognition an important part of their happiness at work, and 63% of those who are “always” or “usually” recognised at work reported being very unlikely to look for another job.

Employee reward versus employee recognition

Reward and recognition are two different approaches to making employees feel valued. Of the two, reward is more clearly an extrinsic motivator. Work hard and get something nice. And, while you could argue that praise from an external source makes recognition extrinsic too, the fact that recognition encourages discretionary effort and pride in your work makes it a way of stimulating intrinsic self-motivation.

Reward: A reward is something tangible given in for exemplary performance. Rewards might be material things like vouchers, wine, or a new set of headphones. But it could also be a team meal out, a day of paintballing, or whatever group activity your people would appreciate. It’s also important to reward employees fairly, and make sure nobody feels cheated, which is why fun rewards are generally better than financial incentives.

The biggest strength of a rewards-based approach is the novelty. Fun perks and prizes can be a great morale booster in the short-term, and a fond memory for your team in the long-term. Just be sure you know what your employees would appreciate, or you could end up wasting money. Consider the diabetic employees in your office before buying everyone a box of Krispy Kremes, for example.

Because much of the appeal of rewards is in the novelty, overuse can kill effectiveness unless the rewards focus on tangible improvements to your employee’s lives. What starts as a nice surprise ends up a basic expectation at best. At worst, your team might even come to dread being loaded down with things they don’t need. It’s best to reward employees at specific points for maximum effect.

The impact of each reward is also often short-lived. When the brown stuff hits the fan on a random Thursday afternoon, it’s unlikely that a bouquet of flowers or a free meal for two will have any significant impact on an employees commitment in that moment.

Recognition: In terms of how you should apply it, recognition is kind of the opposite of reward. It’s best to recognise hard work and progress regularly, but in return, you’ll get long-term gains in loyalty, great for reducing turnover.

It’s pretty much impossible to overdo recognition, with the only caveat being that it needs to be justifiable. If you start congratulating your team whenever they so much as show up to work on time, they’ll just feel condescended to. But taking the time to thank everyone sincerely for their hard work and keeping an eye out for particular accomplishments can make employees feel seen and valued.

Unlike rewards, recognition is essentially free. Kind words cost nothing, after all. This and its other strengths essentially mean that, if you could only pick one, it’s better to go with recognition. But ideally, businesses should strive to find the right balance of employee reward versus employee recognition.

Developing an effective reward and recognition strategy

Finding the right mix of employee reward versus employee recognition for your business can take some trial and error. But, with these tips, you’ll be able to put your best foot forward with policies that show your employees that their contributions matter.

  • Pick specific milestones for employee rewards: If you’re looking to reap the benefits of rewarding employees, but you’re worried about overdoing it, pick specific points through the year. You could reward them at the end of each financial quarter, or even surprise them at the end of performance review season.

  • Ask employees what rewards they want: Surprises can be fun, but it’s well-worth asking employees what rewards they’d appreciate. Not only does it keep you from blowing money on something they’ll hate, but taking suggestions and following up on them shows you listen to your staff.

  • Check-in with employees regularly to recognise their contributions: Employees thrive on frequent recognition. A regular employee check-in is an ideal opportunity to send a personalised thank you, as managers can reply to any answer posted by their staff.

  • Enable peer-to-peer recognition in your workplace culture: Praise from a manager is valuable, as they’re often a sort of mentor to their employees. But peer-to-peer recognition serves an equally important purpose. Because managerial recognition comes from one or a handful of sources, it’s easy for it to seem biased.

    Peer recognition, by contrast, reflects the general feeling of our colleagues, giving it a certain impartiality. Peer recognition is also great for building and strengthening the social connections between your employees, enabling them to work more effectively as a team while supporting each other against job stress.

It can be tempting to think in terms of employee reward versus employee recognition. But remember, everyday employee recognition should be the bread and butter of how managers and HR interact with staff. Rewards, on the other hand, need to be occasional and thought-out. If implemented correctly, the benefits of rewarding employees are huge. Well-timed rewards give employees something to look forward to, helping them to power through at crunch time to achieve their goals.

Download our 30-page HRDs guide to employee engagement to learn more about how to roll out a successful employee engagement programme in a post-Covid world. With tips and tricks from industry experts, you shouldn’t miss out.

Research Associate