What would an effective employee reward program look like?

Written before about employee recognition, and this will be a bit similar: it's on the idea of an employee reward system. Typically how this works at companies is some bouncing ball of these factors:

• Executives consistently get rewarded -- oftentimes even if they have bad years
• The middle gets rewarded less frequently, although periodically are eligible for nice little bonuses or perks
• The rank and files essentially never get rewarded except for some "cost of living increases"

This is logical somewhat, because executives have more responsibility and investment in a company -- so, when it does well, they should reap more from an employee reward system. In execution, though, it's just a giant exercise in hierarchy that creates endless turnover and churn. Employees eventually realize they have no opportunities for growth at this specific company, and they leave. Meanwhile Barry from Operations, who the executives love, is now the company's "Chief Strategy Officer." Welcome to the business world in 2017.

Whenever someone brings up the idea of "Hey, maybe we should reward these employees for working hard," a list of excuses invariably comes next. Some of the best ones:

• “I’m too busy.”
• “It will be inconsistent.”
• “I will recognize them in review season.”
• “Our goal is to hit targets and make money.”
• “I am afraid of showing favoritism.”
• “It is too expensive to keep giving them Starbucks gift cards.”
• “I don’t want them to get complacent in their role.”
• “I don’t need to recognize them for doing their job.”

Nice. This is why most attempts at an employee reward system die in the flood. Let's see if we can fix that.

Employee reward system: Some baseline research

Article here called "The Problem With Rewarding Individual Performers." It's by a psychologist at NYU. I think I've actually emailed with this guy, so that's cool. I fully believe in this concept, by the way -- we force people to collaborate in teams, then promote individuals. It makes literally no sense.

Why do work decisions always seem to completely ignore the psychology of work?

Lots of good research in this article, specifically about the role of groups in identity formation and on people's brains. We evolved in groups (evidence!), and how we structure work is largely a disaster because of the implications therein. Research has also taught us that when people begin to identify with a group, their goals -- and perceptions of goals -- change. That would seem to have massive implications for work, but barely a soul takes this stuff into account when making large-scale people decisions. Sad.

In fact, even the biggest assholes among us show more empathy and compassion when aligned with a group. That's kind of the "jock with a heart of gold" deal in teen movies.

What's all this research leading towards, though?

A four-step plan for a better employee reward system

Here's what the author recommends:

• Focus on employees' social needs
• Set superordinate goals
• Reward team and individual effort
• Value dissent

All are logical. "Focus on employees' social needs" is essentially soft skills. Most managers are terrified of this -- "You mean I gotta be friends with these peons?" -- but it's important. "Superordinate goals" means smashing silos and understanding you are beholden to the organization, not to "product marketing." Reward team/individual means just what it says. Value dissent is the idea that you can actually learn from opposing viewpoints, instead of suppressing them.

Ever worked in an office?

Most managers do none of these things. It's all busy busy busy and urgent projects and meetings and calls. Not much more than that. It's hard to create an employee reward system when most middle managers, revenue-suckers they are anyway, are chasing their own rewards -- not the rewards of others they work with (and manage). It's a bad ecosystem. That explains the poor engagement and trust numbers in the global workforce.

So what can be done for a better employee reward system?

Couple of things:

• Care about people
• Earmark 5% of P&L per department for employee reward/recognition
• Hit managers on their own bonus if they aren't acknowledging those under them
• Think in terms of tangible (gift cards) and intangible (handwritten notes, check-ins) elements

Tangible vs. intangible?

Most excuses for not doing an employee reward system hinge on cost. "These gift cards are piling up," a middle manager coos. "It's getting too expensive!" 

That's why you need intangible benefits -- like walking around and talking to people about their lives, or writing them notes, or organizing a happy hour.

There’s a lot of debate on these types of intangible benefits. Guys like Daniel Pink have made their careers around the idea that these benefits influence motivation and performance more than high salaries. You can take two approaches there, as with anything: one is that getting a handwritten letter from your boss about how great you’re doing is pretty cool, and most of us would feel that way, whether we’re in marketing, operations, or the call center. But a lot of research on salaries and promotions involves concepts that people aren’t always comfortable talking about; as such, you need to take all the “No, a good culture matters more than a high salary” stuff with a grain of salt. A good culture in your business is crucial, and don’t get me wrong there. But people do want competitive salaries. In a capitalism, that dictates the type of life you can live.

If you want to set up an employee reward system and still make your cost numbers, though, consider some intangible rewards.

What's a good example of intangible rewards?

Look at this:

Now, replace “Employee A” and so on with actual people’s names. But you see the concept here? You keep notes on different employees. You start by caring about their career goals! Also learn what’s important to them, what strengths they need to develop, etc. It’s a very basic chart.

See how this could be a powerful driver of motivation? And you don't even need to spend a dime on it, really. (Well, your time is a cost -- but isn't your higher salary because you're now a manager? So maybe spending some time on people could work.)

The bottom line on the idea of an employee reward system

As the psych professor above notes:

The bottom line is that leaders need to understand and harness the tribal psychology that is deeply imprinted onto the human brain. The ease with which people categorize the social world into groups speaks to our nature, and provides a powerful potential tool for leaders. Our capacity to identify with groups provides the foundations for cooperation with others—even complete strangers. Thus, great leaders must become  entrepreneurs of identity.

Yep. Work is all about psychology. We constantly ignore that and try to make it this logical, process-driven place. It can't be that. Until the robots come for everyone (soon!), work is an emotional, psychological place. Any employee reward system needs to absolutely reflect that idea.