What is a reward strategy?

What is a reward strategy?

A reward strategy is used to encourage employee loyalty and behaviours through a comprehensive package of motivating benefits and bonuses; put in place by employers and HR departments in order to reward employees for achieving specific goals. Very often, reward strategies are aligned with business strategies in order to allow the business as a whole to excel as part of a collective effort.

Reward strategies can take many forms and can be comprised of various different rewards and incentives for employees, but at their core, they are designed to motivate employees to perform better in order to help the overall company achieve its business goals.

What are the benefits of a reward strategy?

There are multiple benefits to be gained from reward strategy implementation. Firstly, many businesses report an increase in productivity and overall morale. This is because employees respond well to positive reinforcement and praise. When employees are happy and feel appreciated, they are more likely to continue working hard and producing higher quality work – and this can have a big impact on your business as a whole.

Another benefit is an increase in staff retention. In a competitive candidate driven market, keeping hold of talented, high performing staff is essential. Reward strategy and additional benefits can go a long way to keeping your employees on board. It’s no longer a case of offering the highest salary – job perks and atmosphere are fast becoming the most important factors for job seekers.

What goes into a reward strategy?

As mentioned, reward strategies can be comprised of various different components. Commonly, employers choose to implement financial incentives and bonuses as part of their strategy, but this isn’t appealing to every type of employee, meaning other types of rewards need to be listed, too.

Recently, following the Covid-19 pandemic and the lockdown order to work from home, many employees have found that they prefer the freedom of being able to work outside of the office. For businesses, giving employees the option to work from home as part of a reward strategy can be a useful incentive.

Another component many employers choose to include as part of their reward strategies is additional time off. Many employees respond well to the possibility of accruing time off in addition to their annual leave, making it an effective tool to implement in reward design.

How to develop a reward strategy?

Developing a reward strategy is not quite as simple as putting benefits in place and handing them out to employees as and when. Like every other type of strategy, it needs to be well thought out, and strict, clear processes need to be put in place that employees can clearly navigate in order to understand the route to reward.

Firstly, the management team needs to assess what type of rewards people within the organisation will respond well to, and they then need to identify under what circumstances employees will be eligible to receive the rewards. This involves coming up with a list of achievements and behaviours that are determined as reward worthy. These can include closing a certain number of deals, getting a certain number of name-drops in customer testimonials, achieving a promotion, or anything else.

It’s important to remember that when designing a reward strategy, it needs to align with a wider business strategy. This means looking at what your goals for the company are and figuring out how rewarding your staff can help you get there. For example, if your goal is to improve morale across the business, the rewards will need to reflect this, in which case financial incentives could be something to consider.

On the other hand, if your aim is to boost productivity, including flexible working hours as part of your reward strategy and design is a good idea.

Next, there needs to be training given to line managers so that they can accurately identify when an employee has fulfilled the criteria set for receiving a reward as per the strategy. This needs to be consistent for all departments so as not to cause internal rifts between employees.

The final step to creating a reward strategy is to evaluate the programme after it has been in place. This is to see whether it works and if modifications need to be made.