Employee Benefits & Employee Rewards News: Small rewards best for motivation

We all love a reward. According to TallDesk, Extrinsic rewards can be very effective at increasing performance. One meta-analytic review of 45 studies found that the average effect of extrinsic reward programs on all work tasks was a 22% gain in workplace performance. These gains are significant and can have a major impact on the overall performance of the company.

But what rewards work best? The latest research according to Alain Pinsonneault of McGill University’s Desautels Faculty of Management suggests that IT professionals are far less likely to leave a company when their chances of promotion are higher, yet businesses cut back on these to avoid the costs of large salary increases. Therefore, smaller but more frequent promotions increase employee retention whilst keeping costs low.

The research, co-authored by Frank MacCrory of Fordham University’s Gabelli School of Business, and Vidyanand Choudhary of the University of California’s Irvine’s Merage School of Business, analysed 5,704 IT professionals at a North American-based systems-integration and consulting firm with offices in over 100 cities in four continents. The data was drawn from HR records over a five year period from 2005 to 2010.

According to corporate rewards, this is also a growing trend when it comes to the traditional ‘annual rewards’.

“Companies implementing employee incentive programs are aiming to incentivise staff throughout the year, to extend the feel-good feeling. An increasing number of businesses are staggering Christmas rewards, so that some is given pre-December with the remainder presented in the New Year. This approach gives staff something to look forward to in January, when they may be feeling a little lacklustre, and it brings some positivity back to the office during what can be a challenging period.

Taking this a stage further, some businesses like to reward staff on a more regular basis with the option to earn some form of bonus every couple of months, perhaps culminating in a larger sum at Christmas. This helps to maintain a more constant level of staff motivation throughout the year, rather than concentrating it all at one time. Of course the ultimate would be to allow staff to choose how they want to be rewarded; the single, larger reward at Christmas versus the ‘little and often’ approach. Having the flexibility to offer both options is certainly the best way to keep your wider workforce in good spirits and feeling valued.”
Pinsonneault adds: “A key factor in the retention of IT professionals is creating a ‘promotion ladder’ within a firm. This allows for employees to aim for smaller, more frequent promotions, and spares many from the dissatisfaction of losing out on the larger financial benefits of elusive, coveted promotions – a shock which is likely to push them to move on from the company. This can be accomplished either through marginal adjustments to existing jobs or by inserting new levels into the job ladder.”

“For businesses wishing to decrease staff turnover without affecting their profit, offering other benefits at each step on the ladder can be seen as a small investment into avoiding the high costs of replacing employees. Take, for example, the SAS Institute’s retention strategy of spending $6,000 to $8,000 on perks per employee to prevent $50 to $70 million in replacement costs.”

The researchers add that industries with low turnover rates are better served by motivating employees with large but infrequent promotions.

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