Charles Cotton: Aligning employees takes careful planning and investment

Charles Cotton

There are a whole range of approaches employers can take to reward their staff, which can be both financial and non-financial: a bonus, pay rise, holiday and recognition of work are just a few examples.

Such variety indicates that no one approach can suit every circumstance, and employers must tailor their plans to complement their own contexts.

But do these rewards change behaviours, or help people think that their efforts are welcome and valued? As shown by the March 2015 CIPD report, Show me the money: The behavioural science of reward, cash can have a positive impact on productivity where jobs are routine and repetitive. Where they are not, it can be more challenging to design, communicate and implement a reward-based plan.

Employers also need to consider that both financial and non-financial incentives can encourage certain behaviours, and not necessarily the ones that were hoped for. For instance, there are examples of commission plans encouraging mis-selling, and firms having to both compensate customers and pay a regulatory fine.

These issues can be dealt with by careful design. However, the more there are checks and balances, such as deferring pay by giving it in a mixture of cash and equity or subjecting it to a range of short-, medium- and long-term performance criteria, the harder it can become to ‘sell’ the plan to employees and the less motivating they find it.

That is not to say an employer should not share success with employees or use rewards to incentivise them to achieve more. It is just that they must be prepared to invest time and money in creating, implementing and managing a scheme appropriately.

Employers should also not forget the importance of giving people rewarding and stimulating jobs to do in the first place. As American psychologist Frederick Herzberg is quoted as saying: “If you want people to do a good job, give them a good job to do.”

Charles Cotton is senior reward and performance adviser at the Chartered Institute of Personnel and Development (CIPD)