Retaining talented staff is a constant issue for employers, one that becomes even more taxing in a booming market when cash-rich competitors are seeking to expand and are more than happy to offer golden handshakes and other incentives to entice your best employees away. Making sure you have an appropriate rewards and recognition scheme in place is vital.
According to a new report from HR and people development body CIPD, reward is not all about the money – businesses would do well to consider behavioural science when it comes to making staff feel valued.
Jonny Gifford, research adviser at CIPD, says: “A number of factors should be considered when shaping a reward programme. It must be recognised that monetary rewards aren’t everything and that they can even destroy people’s motivation. Enticing the workforce with financial incentives and a strong bonus culture can lead to unwanted, risky and even unethical behaviours.”
Money has a powerful effect on behaviour and can encourage us to work harder, acting as a tool to buy the things we want and also as a drug, in as much as it stimulates parts 
of the brain associated with immediate gratification. But, says the CIPD, money alone runs the risk of undermining a basic desire to do a good job. Instead, it encourages HR professionals to think about how employees’ brains work and to consider other options to reward and retain staff.
Satisfaction with reward can be influenced by several factors, both internal and external. The economic climate and how we compare our rewards and skills with those of our peers can have a significant impact on the value placed on a reward scheme. A tendency to overvalue our own skills, a deeply ingrained need in our psyche for fairness, confidence in our ability to command a greater reward elsewhere, and being able to assess the future accurately will all affect how we view rewards. These elements make creating an effective scheme a major challenge.
So what should HR professionals be thinking about when designing the perfect rewards system?
- Pay structure – fairness in pay structures is vital. Not only does a recipient of a (perceived) unfairly distributed reward produce negative emotions, others may also pass up receipt of a reward if they think the distribution of rewards to others is unfair.
- Promises – even a promise of a reward can lead to performance improvement. However, deferred incentives can be prone to temporal discounting – our failure to fully value future rewards – so regular communication about the reward and its value is required.
- Symbolic rewards – awards, certificates, chocolates, flowers, a thank-you, rewards of notional value can have a big impact on staff as they are in keeping with their intrinsic motivation and show that a company is not seeking to control motivation, but simply to congratulate.
- Value – the relative value of rewards can differ massively among staff. Financial reward may have an element of subjective value, but it always has a value. People will attach very different values to a day paintballing as a reward, however.
- Competition – framing work activities as games and offering rewards for success – points on a leaderboard, gifts or cash – can improve motivation and engagement. Games-based rewards both recognise achievement and introduce an element of fun into the workplace. However, not everyone will be motivated to the same degree by competition.
- Collective rewards – team-based pay can be used to foster co-operation and knowledge-sharing, but can also raise issues around equity and justice. The whole team has to work together and feel as though each member is working equally for this type of scheme to work effectively.
CIPD performance and reward adviser Charles Cotton concludes: “It is important that businesses regularly reinforce the total value of the package they are offering to individuals and pay equal attention to both short- and long-term rewards.”
Whatever the reward you offer staff, it seems that there is value in thinking about more than just the money. Take time to understand how your employees think and how the world around them affects the value they place on the reward you offer.
10 key behavioural considerations
1 Pay and reward decisions have an emotional/subjective component
2 Individuals’ preference and satisfaction levels in relation to their reward are dynamic, not fixed
3 Pay and reward systems have a social context, in that comparisons are made with others and not focused solely on the individual
4 Individuals and organisations need to assess the present and future need of any pay or reward systems
5 Financial incentives may “crowd out” people’s underlying motivations
6 Money may have distinctive and powerful effects on behaviour – positive and negative
7 People often use shortcuts in their thinking that influence their decision-making around rewards
8 Choices in benefits should be limited and meaningful
9 People tend to undervalue a deferred reward
10 Risk and uncertainty in rewards (for example, performance-related pay) can reduce the subjective value that employees place on it and affect behavioural responses
