Leveraging Financial and Nonfinancial Bonuses for Strategic Employee Engagement
This article was updated on Oct. 4, 2018.
Variable pay is in place at more than 80 percent of organizations, according to the Society for Human Resource Management (SHRM). This means firms are leveraging financial and nonfinancial bonuses to go beyond base salaries and discover ways to reward workers and encourage behaviors strategically.
Knowing the Importance of Reward and Recognition
The deliberate application of rewards and recognition is a critical component of sustained employee engagement practices. For many organizations, this brings to mind a stand-alone bonus program or the latest recognition tool.
According to the 2016 ADP Employee Engagement Study, 66 percent of millennials, 62 percent of Gen Xers and 57 percent of baby boomers are more likely to be motivated by financial rewards. Interesting to note, however, is that, even though financial rewards are motivating regardless of age, non-financial rewards such as praise and peer recognition increase motivation as age decreases.
But the reality is a blended approach may be best for meeting the diverse needs of workers and keeping costs reasonable. In addition, with the rise of the millennials and an increasingly diverse population in the workforce, firms need to find flexible ways to meet the variety of worker needs by establishing a culture of recognition.
Blending Your Approach
As SHRM notes, 90 percent of organizations use more than four methods of rewarding employees, including cash bonuses or extra paid time off. Financial and nonfinancial bonuses offer a variety of options to reward, recognize and ultimately engage employees. Being able to flex the approach to meet the needs of the workforce is where the value comes in. A blended approach can bring in not only executives and managers, but also co-workers. Peer recognition, or the option of allowing someone's team members to offer recognition for good work, allows managers to get a broader view of an employee's performance while still rewarding the worker for a job well done.
Implementing an Approach
A common mistake when developing something like this is to label it as a "program." While there are some aspects that fit that definition, this really needs to be a culture shift. The purpose of seeking culture change instead of a new program is twofold:
- Unlike many programs, culture adoption doesn't have a specified end date.
- Culture shifts are embedded across the organization's practices, not narrowly confined to one area.
Coaching Your Team
An effective way to help coach your executive team on how to adopt a culture of recognition could include the framework called "GIFT," which stands for:
- Give regularly, even if it's not always monetary
- Incentivize behaviors that you want people to exhibit over and over again
- Find opportunities to recognize good work
- Treat employees differently — not everyone wants a public celebration or a plaque on the wall
GIFT — it's simple, which is what can matter most in this approach. Creating a complex program with dozens of rules and options can stall out the effort before it gets any momentum.
Meeting Diverse Needs
In the book "Giftology," John Ruhlin talks about his experience trying to propose to his fiancee. He created an elaborate scheme, including dressing himself as an old man, creating props and scheduling secret plane flights. In the end, the master plan didn't work out, and he came to realize that the idea was well-suited to his own tastes for adventure and intrigue but didn't fit the down-to-earth preferences of his future bride. The lesson he learned was a powerful one — we should each look for chances to give what others want, not what we want for ourselves.
This can apply equally in the workplace when it comes to financial and nonfinancial bonuses and rewards. For instance, millennials don't care only about compensation when looking for a new role. Harvard Business Review notes that for millennials, learning opportunities are the most desirable aspects of a new employer. While this is a nonfinancial opportunity, it has the ability to drive incredible value for this audience.
Delivering an employee experience with the right mix of rewards, recognition and opportunities is part art and part science. The important lesson is to start simply, weave the practices throughout the organization's culture and look for ways to meet the varying needs of your diverse employee population.
