What is the purpose of reward systems for the employees and how does it affect the organization?

Organizations use a reward system for employees to appreciate their worthwhile employees’ hard work and contributions.

Nevertheless, the rationale behind a reward system is to make the hardworking employees continue their good work. 

Companies also implement such a system to make unfocused and unproductive employees efficient and perform better.

Relevant research reveals that the main reason behind employee motivation is the lack of recognition for their work. Another study shows that companies with an employee reward system have 13 % more employee engagement than those with no such system.

Relevant stats and studies affirm that reward systems can make employees do wonders for a company. Yet, there are some misunderstandings surrounding it. 

Moreover, this article is more of a myth buster that will tell you how the disadvantages are really not the disadvantages and what’s the truth behind the impact of employee recognition and rewards.

Below, we bring into light the reality of the false beliefs associated with the employee reward system, along with discussing the advantages that it actually brings for any organization.

It results in additional expenses (but it actually does not!)

A reward system for employees may cause a company extra costs. However, it is mostly when a company considers the effectiveness of a reward system limited to monetary rewards only, which is, however, not the case, especially with the younger employees.

A common misconception in terms of employee rewards is that they should be some out-of-the-world expensive gifts. Also, a common notion is that rewards do their job when they include some kind of financial value. While monetary-based gifts are indeed valued by the employees, overemphasizing them and considering them the only option in a reward system is entirely wrong.

Making use of non-monetary rewards is more impactful since an employee can be recognized immediately for notable work. On the contrary, a monetary reward, such as a bonus, usually requires some time, which takes away the essence of an efficient recognition: an in-time appreciation.

Non-monetary rewards are cost-efficient as they involve no or little expense. Thus, the notion of a reward system bringing additional costs for a company is, in most cases, a misunderstanding and, in some cases, a hoax.

In conclusion, as opposed to a common misconception, rewards do not result in additional costs. However, suppose a company overstresses expensive gifts and high-monetary rewards without understanding that their non-monetary counterparts are equally effective, if not more. In that case, it may result in additional expenses in some cases.

Advantages of reward system for employees: The reality

It motivates the employees

The first and foremost advantage of rewarding your employees is that it helps to motivate the workforce. It encourages the employees to take out the most of their potential in their work.

A reward system may hold no significance to those employees, at all, who are not willing to work with motivation and dedication whatsoever. However, rewards may act as a catalyst for those who have the skills and focus but require a little drive to work with their full potential.

Rewards can also help to bring the most out of your average-joe employees. When you start associating rewards with achievements, every employee starts to put in more effort, irrespective of their capability. As a result, the underachieving employees also come out as top-performers.

It gives job satisfaction

When employees get rewards for their achievements, they consider their respective careers to be on the right path.

With a reward system in place, the employees are likely to believe that their careers are heading in the right way, leading them to have job satisfaction. And with the employees satisfied with their jobs, they tend to stay and work longer for their companies.

In addition, it leads the employees to believe that their careers are in their control, besides being on the right path. It furthers their happiness and satisfaction from their jobs, making them perform better and be more productive.

It fosters workplace competition

One of the advantages of a reward system for employees is that it results in healthy workplace competition.

When employees witness their peers receiving rewards and recognition due to an accomplishment, they naturally desire to earn the same. So, the workplace becomes competitive with each workforce employee working hard to make credit and limelight for achievement. 

The competitive work culture results in the elevation of the performance levels of the employees, making the company the absolute winner of this competitiveness.

It clearly defines the desired goals/behaviors

A reward system involves rewarding the employees against particular or desired behaviors or organizational goals. 

With the employees understanding what would lead them to earn rewards, it becomes easier to acquire one. Also, the goals that the organization wants to achieve also become apparent. Thus, with a criterion set through a reward system, the long-run goals of the company also become understandably clear.

Read: A Few Ways Of Reward System For Employees

A Reward System for Employees: To use or not?

Clearly, a reward system for employees is indeed advantageous. Its only disadvantage remains in a false notion that rewards are expenses and thus bring extra costs with them, which is, of course, not true as discussed in the article. So, the takeaway is that you should use a system that helps in rewarding employees.

Relevantly, Bravo enables an organization to practice a reward system that is both productive and cost-efficient. It comes with an array of non-monetary rewards using which your company can bring motivation to the workplace and can also help you perform an in-time employee recognition. You can book a demo here to learn more about it.

Frequently asked questions

How do you create a reward system?

You can create a reward system by rewarding behaviors and teams, involving the employees, being specific and consistent, and aligning rewards with your professional goals.

What makes an effective reward system?

A reward system that is inclusive, unbiased, specific, and timely is more effective than the one which is not.

What is the purpose of a reward system?

A reward system makes the employees work with more dedication and focus. Therefore, it motivates the employees to put more effort into their respective work.

How do you reward employees fairly?

A fair reward system for employees should provide equal opportunities for the entire workforce. Furthermore, it should be impartial, so no employee feels alienated.

What are the types of reward systems?

The main types of reward systems are monetary, non-monetary, employee assistance, and employee recognition.

How does reward system affect a company?

What is a reward system how can it affect work output of employees?

What is the effect of reward system on productivity of employees in any organization?

What are the effects of giving rewards to employees?