Effective Leadership #27 – Types of Reward System

Welcome to yet another article in Effective Leadership series. In our previous article, we saw the importance of rewarding staff members. In order to keep the staff members motivated they have to be rewarded consistently. If a staff member is found valuable for the team, in order to sustain their contribution, a company and the responsible leader should reward the staff member with any type of reward system based on the possibility. There are different types of reward system used to reward a staff member. The reward system can even change from one company to another. It is not always mandatory that all the companies in the world should have the same set of policies to reward a staff member. It can differ based on the type of company and the country to which the staff members belong to.

Based on the type of contribution a staff member does to the team, the reward system is decided. There are different types of reward system as mentioned earlier. In some companies, the employees can even get rewarded by multiple reward systems. For example, the employees can get a holiday package along with a salary increase as a reward. This is purely company or manager or leader’s decision. If an employee is showing consistent stellar performance every month or every week for that matter, it is practically impossible to provide a salary hike every month. In such cases, the company decides to give recognition rewards or even incentives to keep the staff member motivated.

Choosing Reward Systems

Reward Implementation Advantages
Salary Increases: Considerable increase in the basic rate of pay of the staff members. This will require the management to check the overall salary scale generally used considering many factors such as experience and skill set and place the staff member within that scale.
  • This will help the individuals know where they stand exactly in terms of their salary compensation.
  • This will act as a tool to reduce the competition within the team members.
Bonus Payments: These are one time payments made during a financial year based on the individual performance as well as company’s performance. Based on the company’s policy, there can even be more than one-time payments every year. Some companies do it from 1 time to a maximum of 4 times. This bonus can be of different types. This will usually be a financial incentive for the staff members after measuring the contribution of the staff members. This will also be dependent on the company’s overall allocated budget for bonuses.
  • Increases motivation and staff members are satisfied.
  • Staff members are motivated to deliver quality product and services.
Profit-Sharing: A percentage of profit is shared among the staff members of the company based on their performance. The profit of the company is usually the efforts made by the staff members. Management should workout to bring a fair policy to distribute the profit. They should either split it country-wise if they are a global organization or they have to split it among divisions and corporates.
  • Makes the teamwork towards common goals.
  • This will make the staff members feel motivated to put some extra efforts.
Share Ownership: Gifting the employees of the company some of the company shares or selling the shares of the company at an affordable price for the sake of employees/staff members to benefit. Any rewards create a pathway towards the success of the company. Most of the rewards are usually channelled from the top level management to lower levels.
  • Motivate employees to show a sense of involvement.
  • The idea of a long-term relationship with the company increases.
  • Staff members are given a good visibility towards top-level management and group results are visible.
Recognition Rewards: There are many types of recognition rewards. This starts by providing just a certificate for providing prizes, gifts, holiday packages, parties, outings etc. To be eligible for recognition, performing to the highest standards is important. This is just given as an exception instead of a rule.
  • Any strong performer of the team can be rewarded.
  • This reward program gives good satisfaction to the staff members.
  • Even verbal recognitions motivate the staff members and make them contribute a lot to the team’s success.
Composite Rewards: These are the types of rewards usually assigned or allocated to either an individual or team or based on the company results. The individual’s contribution is compared with the company’s growth and both are combined together and the teamwork is rewarded.
  • This can surprise some of the staff members and let them keep the interests fresh.
  • Team spirit can be increased with the help of team recognition programs.

Problems in Reward systems

In most of the companies after a reward is provided the employees are most likely not fully happy. They even compare their reward with others and get dissatisfaction. This is a quite common thing seen in most of the companies. In some companies or teams, the decision may not be intentional but the leaders may not have other options. In some companies, the reward system or the reward calibration system will be outdated. It will be evident that the reward system will need fixing but the company will still continue to use it. If the manager or leader finds some dissatisfaction among any of the staff member, it is always good to have a one on one meeting with the staff member to clarify things. If the clarifications are not made properly, the word will spread to all the other team members as well and there can be negative energy spreading inside the team.

Image Source: 

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Hope you had an interesting read. Share your views on this topic in the comments section.

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My previous articles in this series:

Effective Leadership #1 – An Introduction

Effective Leadership #2 – Focusing on Quality

Effective Leadership #3 – Learning From Others

Effective Leadership #4 – Gaining Experience

Effective Leadership #5 – Comparing Leaders and Managers

Effective Leadership #6 – Developing Strengths in General

Effective Leadership #7 – Building Personal Strengths

Effective Leadership #8 – Mastering Roles

Effective Leadership #9 – Evaluating Key Leadership Roles

Effective Leadership #10 – Preparing to Lead

Effective Leadership #11 – Staff member recruitment

Effective Leadership #12 – Forming the team

Effective Leadership #13 – Exercising Authority

Effective Leadership #14 – Delegating Tasks

Effective Leadership #15 – Process of Delegation

Effective Leadership #16 – Effective and clear communication

Effective Leadership #17 – Dynamizing Groups

Effective Leadership #18 – Leadership Types

Effective Leadership #19 – Military Leadership Model

Effective Leadership #20 – Collegiate Leadership Model

Effective Leadership # 21 – Decision Making

Effective Leadership #22 – Goal Setting

Effective Leadership #23 – Different Roles in a Team

Effective Leadership #24 – Developing Teamwork

Effective Leadership #25 – Empowering team and team members

Effective Leadership #26 – Rewarding staff members

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