In last week’s Teaching Tuesday, I wrote about the difference between rewards and recognition, and some best practices for designing rewards and recognition programs. At the root of that conversation was the idea that rewards and recognition play an important part in motivating your team.
What I did not touch on is the role that rewards & recognition play in the bigger picture. Owners, and even some C-suite, have to think about rewards & recognition differently. At that level of the business, everything is a budget item. Each dollar spent should make a contribution to the overall business outcomes. When you’re setting aside your budget for people, consider where rewards & recognition fits into the overall picture. One easy trap to fall into is to set aside x% of revenue for pizza parties, ping pong and pool tables.
But that’s not how your employees conceptualize rewards and recognition, which is why there’s sometimes a gulf between senior leaders who think they’re investing in their team, and a team that feels disengaged.
We’ll start with the obvious fact that pretty much everybody loves pizza, and the same can be said of most other perks. But do pizza parties and the like actually move the needle on performance? The evidence says no, those kinds of perks might keep mediocre performers from quitting, but that’s not what motivates top performers.
And it’s the top performers who matter. Most businesses operate on some variation of the Pareto principle – the top 20% of performers deliver 80% of the results. Ultimately, the success of your business will be determined by your ability to keep the 20% who deliver, happy. You don’t even need to motivate them, because the top 20% are internally driven. You just need to keep them doing what they do best for the best.
What this means is that rewards and recognition should be part of the total compensation budget, not an add-on. Rewards for top performers include the things that matter. Money is one. After all, even people who love their work have bills to pay and mouths to feed. Time, the most precious commodity of all, is another. This is why top performers are more likely to resist return-to-office mandates and get away with it. Their time is valuable, and they aren’t interested in spending their time sitting in traffic.
Top performers are also motivated by achievement, opportunity, social connection and company purpose. The interesting thing about most of these is that they don’t necessarily cost money. Giving someone the opportunity to run the department they built is free. Giving people autonomy is free. Trust is free, and so is giving people the chance to work with an amazing team.
While salary is not free, top performers are otherwise relatively easy to motivate, as long as you’re continuing to invest in them and in the growth of the company, so that opportunities are abundant.
The key takeaway is that rewards and recognition programs cannot exist in isolation from everything else that you do. Parties are great for retaining mediocre talent, but if top talent is leaving out the side door, they’re taking a big chunk of your business’ upside growth with them.
