http://www.entrepreneur.com/article/75340

The main issue with today’s methods of rewarding employees is that employers are focusing too much on a select few of the types of rewarding and not utilizing all of them. The employers are missing one or more of these elements (usually recognition and/or appreciation), and the elements that are addressed aren’t properly aligned with the company’s other corporate strategies.

Sometimes, rewarding systems can in fact encourage behavior that is not optimal for the overall performance for a firm. For example, a firm which compensates its employees for extra working hours (coming in earlier in the morning and finishing work later at night) does not encourage your employees to innovate and create new ways of working that are more efficient, this specific rewarding system just encourages to work longer which often does not result in better results.

So how can an employer decide on which rewarding systems to use that align with the firms goals?

Firstly, the employer should identify the behaviors that are important to the company. Those activities might include enhancing customer relationships, fine-tuning critical processes or helping employees expand their managerial skills. Whatever the case, the employer should first identify what behavior it wants to encourage before applying any rewarding systems.

Compensation is the most often used form of rewarding one’s employees. It is often effective because employees are attracted to higher incomes especially if their current regular wage is relatively low. However, is selling equity to the workers a better form of incentive as the work they put in benefits themselves in the form of dividends? would this be good way to reward one’s employees?

The recognition and appreciation elements of the strategic rewarding system are underused types of rewarding systems in businesses. These two elements rarely receive the attention they deserve from business owners, which is amazing because they’re the low-cost/high-return ingredients. Employees like to know whether they’re doing good, bad or average, so it’s important that you tell them. I believe that employers should use these two types of rewarding systems more often. First of all it is free so it reduces the costs of the firm. Secondly, personally demonstrating the employer’s gratitude for an employee’s good work can be effective due to the gesture being personal while financial compensation is very impersonal.