What are the benefits and challenges of using non-monetary rewards in human resource management?

1 Types of non-monetary rewards

Non-monetary rewards are an important part of HRM, as they can be tailored to the goals, preferences, and needs of the employees and the organization. Intrinsic rewards are internal feelings of satisfaction, accomplishment, and fulfillment that come from doing work well, while extrinsic rewards are external forms of recognition or appreciation, such as praise or awards. Relational rewards are the social and interpersonal aspects of work that employees value, and developmental rewards are opportunities for learning, growth, and career advancement.

2 Benefits of non-monetary rewards

Non-monetary rewards can have many benefits for both employees and organizations, such as enhancing motivation, performance, and productivity, improving retention, loyalty, and commitment, boosting engagement, satisfaction, and well-being, increasing creativity, innovation, and problem-solving, and reducing costs and increasing flexibility. These rewards tap into intrinsic and extrinsic drivers, show appreciation, respect, and trust, foster a sense of meaning, purpose, and belonging, reduce stress and burnout, encourage autonomy, initiative, and feedback, and provide opportunities for learning and growth.

3 Challenges of non-monetary rewards

Non-monetary rewards can be challenging and have limitations, such as difficulties in designing, implementing, and evaluating rewards that are fair and match expectations. There is also a risk of over-reliance, overuse, or misuse of non-monetary rewards, which can undermine their effectiveness and create resentment. Additionally, there can be trade-offs and conflicts between non-monetary and monetary rewards, as well as limitations that prevent them from addressing basic needs and wants of employees.

4 Best practices for non-monetary rewards

To maximize the benefits of non-monetary rewards and overcome the challenges, it is important to align them with the organizational strategy, culture, and values, as well as the employee's goals, needs, and preferences. Additionally, it is essential to communicate the purpose, criteria, and outcomes of non-monetary rewards and solicit feedback and input from the employees and stakeholders. Furthermore, diversifying and customizing non-monetary rewards to suit the different types, levels, and stages of employees and to reflect their performance, contribution, and potential is key. Integrating and complementing non-monetary rewards with monetary rewards to create a holistic, balanced, and attractive total reward package is also important. Finally, it is necessary to review and update non-monetary rewards regularly to ensure their relevance, effectiveness, and value and to adapt to the changing internal and external environment.