Giving workers raises and providing employee recognition are effective ways to encourage better performance. However, many workplaces aren’t pointing out the connection between better performance and higher pay. If your business isn’t clearly demonstrating the correlation between hard work and financial wards, your investment in raises is likely getting wasted.
To learn more about the best practices in rewarding employee performance, read on.
Do You Reward Higher Performance With Recognition and Higher Pay?
At Asure, we’ve seen the hard data about rewarding employee performance up close. In our recent 2024 HR Benchmark Report, we asked 1,065 small businesses if they rewarded higher performance with higher pay and recognition. Afterward, we asked the same companies about their growth during the preceding year.
We found that fast-growth companies were far more likely to reward higher performance.
71% of zero-growth businesses said they rewarded higher performance with recognition and higher pay.
89% of fast-growth businesses said they rewarded higher performance with recognition and higher pay.
The Advantages of Rewarding Performance
Fast-growth companies are significantly more likely to reward performance with better pay or recognition for a reason. When you reward a behavior, workers quickly catch on and try to replicate the desired behavior.
In a recent Mission to Grow interview on “Performance Optimization: Motivate and Align Your Team To Achieve Growth Goals,” Mary Simmons, the vice president of HR Compliance, Learning, and Development at Asure Software, spoke about the benefits of rewarding performance. According to Simmons, “Study after study will tell you that recognition needs to be verbalized, and you need to tell them why they’re getting that raise.”
When you verbalize your recognition and explain why you’re giving raises, you’re showing your appreciation for the employee’s contributions. More importantly, it demonstrates which behaviors you want to see and encourages employees to repeat those exact behaviors. Plus, rewarding employees for a job well done increases engagement levels.
In the Mission to Grow interview, Simmons discussed a remarkable example of this concept in practice. She was working with a car air conditioner manufacturer that struggled to meet higher production goals in the summer. When they drilled down into why those numbers weren’t getting met, Simmons found that the manufacturer was giving people raises based on production but not telling them why. By verbally explaining that raises were directly linked to production, the manufacturer was able to encourage higher production levels during the busy season.
According to Simmons, “We’re talking about performance here and driving performance. If you don’t leverage that recognition to drive performance, you have completely wasted your money. You might as well throw it out the door.”
What Do You Need To Do To Improve Your Pay-for-Performance Process?
When it comes to best practices for employee recognition and pay increases, you should start by figuring out the metrics you use and how you create performance reviews. Then, you’ll need to use these metrics to evaluate workers and share your findings with each individual.
1. Improve Your Performance Reviews
First, start by focusing on your performance review process. The performance review should be built off of the job description for the position, so employees can easily see what their expectations are. During the performance review and throughout the year, it’s important to communicate these expectations so workers aren’t surprised by their review results.
2. Determine Which Metrics You Care About
The metrics you track and reward are the metrics that employees are going to focus on. As you create and adjust your performance review system, it’s important to pick metrics that reflect your company’s goals.
3. Evaluate Your Employees
To reward performance, you’ll need to evaluate which employees are meeting their performance goals. Then, meet one-on-one with your workers and discuss each performance review. During this stage, you’ll need to connect the worker’s performance to their reward so that they clearly understand the connection.
Choose How You’ll Reward or Recognize Your Employees
Once you’ve figured out the type of performance goals you want to achieve, take some time to consider how you want to reward and recognize your workers. While raises and financial incentives are always appreciated, there are some incredibly effective recognition tools that are essentially free.
Annual Bonuses
Annual bonuses are an effective way to recognize your employees. They are particularly good for workers who have sales goals. For example, some organizations base bonuses on the company’s revenue or profitability.
Rewards
Rewards can be something simple, like a gift card. To recognize a group that meets its shared performance goals, you could buy lunch for everyone or bring in a nutritionist for a special lunchtime class.
In one unique example, Simmons discussed a story about a tax firm that needed employees to work extra hours during tax season. They rewarded workers by buying lunch and dinner. In addition to rewarding workers for the extra hours, these meals meant employees could get more work done because they didn’t have to leave to get food.
Raises
Raises are a classic way to reward workers for meeting their performance goals. When giving a raise, it’s important to directly tell workers why they are getting a higher raise. In turn, this encourages them to continue that behavior.
Public Recognition in a Meeting
Rewards don’t have to involve money. Public recognition is an incredibly effective way to reward your high performers. When it comes to public recognition, 28% of workers in a Gallup poll say the most effective recognition is from their manager. 24% of employees say recognition is most effective if it is from a CEO or high-level manager.
In the same Gallup poll, employees listed public recognition as one of the top six types of recognition. Private recognition, monetary rewards, and promotions also made the list.
Employee of the Month Board for Top Performers
An easy way to publicly recognize your workers is by creating a bulletin board that showcases your employee of the month. Besides putting the employee’s picture on the board, you can also add information about why they were chosen. Afterward, this information can motivate other employees to achieve the same level of performance.
Use Peer-to-Peer Recognition
Peer-to-peer recognition is extremely effective. It shows workers that their contributions are valued and appreciated by their peers.
You can incorporate peer-to-peer recognition into other techniques, like your employee of the month board. Rather than use descriptions and commendations from bosses, get other employees to nominate employees of the month. Then, you can use quotes from other workers when you create your employee of the month board.
Certificates
Even if your workplace has no funding for recognition programs and pay increases, you can easily create a certificate for your employee of the month. Then, you can hand out the certificate during your staff meeting. While no money is changing hands, this type of public recognition is great at motivating workers.
Best Practices for Employee Recognition and Pay Increases
To make the most of your employee recognition program, there are a few important things to remember. Incorporating non-monetary recognition, being consistent, and tying pay to performance are just a few of the best practices you should adopt.
Remember: Non-Monetary Recognition Can Be Incredibly Effective
Many small businesses operate on a shoestring budget and can’t afford to give every top performer a bonus or a raise. Fortunately, there are many non-monetary recognition options that are incredibly effective. Employee of the month certificates, recognition in a meeting, and written messages on sticky notes are simple ways to recognize employees for doing a great job.
Always Tie Pay to Performance
When you do give raises to reward a worker’s performance, it’s important to always tie them to pay. Otherwise, you’re just wasting the pay increase. The type of behavior you incentivize is the type of behavior you’ll get, so communicate your expectations and appreciation to workers.
Be Consistent
If you reward a behavior one day and then ignore it the next, employees will feel less motivated. When rewarding behaviors and communicating expectations, it’s important to be consistent.
Other than ensuring good motivation, consistency matters for legal reasons as well. If you reward one employee and not the other, you could be unintentionally laying the groundwork for a disparate treatment case.
Make It Public
Being recognized in front of peers heightens any recognition you give to your top performers. In addition to being a better reward for the employee, public recognition can be a motivational tool for their coworkers as well.
Discuss Rewards and Recognitions Ahead of Time
You can get more out of your investment by discussing the rewards and recognition programs with workers early on. Explain the types of behaviors that will be rewarded and any metrics you’ll be using. Afterward, your employees will know exactly what kind of behaviors they’ll need to demonstrate in order to get a raise, gift card, or other reward.
Improve Your Company’s Growth by Rewarding Performance
Rewarding performance is an essential way to motivate your workers. Unsurprisingly, our survey found that small businesses were more likely to report having faster growth if they rewarded employee performance. When employees get rewarded for performing a certain action, they’re far more likely to do it.
If you’re interested in learning more about small business growth and performance management, reach out to our team of small business HR experts today.