9 Steps To Designing A Good Employee Reward Program

Designing a working reward program is not only going to be to be a morale booster for your employees in that they get recognition for their work, but it will also be advantageous for you and your business as a whole because it helps provide incentive for increased productivity.

Awarding tangible gain for superior performance can be implemented using both recognition programs and reward programs.

Recognition programs are aimed at providing psychological gain as a reward for increased performance. They are usually aimed at increasing feelings of satisfaction and loyalty in the minds of employees. It is important, however, to point out that although recognition programs are not based on monetary compensation, they could also cost money.

Reward programs are usually aimed at providing physical gain as a reward for superior performance. This could range from bonuses to a raise in pay or even a promotion, and usually will tend to be monetary in nature. Here are some steps to designing a good employee reward program:

#1. Identifying employee expectations

The first step to building or designing a functional employee reward system is clearly identifying your organization’s expectations from employees. This is to ensure that your program effectively targets behavior and performance that is genuinely above expectation.

#2. Identifying the goals you want to support

The next step is to identify the goals your program would support. These are the behaviors or the type of performance you are hoping to encourage and reinforce. It is important to make sure they are realistic and can be achieved by all members of your staff, but are also above the organization’s expectation of the employees.

#3. Team or individual based?

Identifying whether performance will be evaluated based on individual or team output is next step you should take. You also need to determine if you would want it to be competitive or noncompetitive. This would help you better create a budget.

#4. Choose a schedule of reward

Next, decide on the schedule–be it continuous or intermittent, variable or fixed. It is important to know that an intermittent and variable interval reward schedule would best reinforce your goal after the program is stopped.

#5. Length of the program

Decide on how long you would want to run the program for. While short-term reward programs might seem more attractive, long-term reward programs yield greater effect.

#6. Set KPI’s

You will need to develop a set of metrics and key performance indicators that will help you measure performance in a more accurate and relevant manner. It be the exceeding of targets by a certain percentage, non-absence over a certain period of time, and etc. Make sure the metrics and KPI’s you choose are clear and realistic.

#7. Decide on the reward

You will need to decide on what form your reward will take. Be it a percentage bonus, variable bonus, salary increment, shared profits etc, the option you choose should reflect the peculiarities of your organization.

#8. Make a Budget

Make sure your financial resources would be able to support the program you have designed. Feel free to make changes to suit what you have if the need arises.

#9. Make it known

Communicate all relevant information about the reward program to your staff. You should remember to include it in the employee handbook (if it is long-term), otherwise a circular will be sufficient.


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