The Importance of Getting Incentives, Rewards, and Recognition Programs Right

Happy workers enjoying their job

Top strategies to design incentives and recognition programs that boost employee engagement and drive business success

As we near the end of another year, I’ve had numerous conversations with CEOs and founders about a challenging and essential topic: getting incentives, rewards, and recognition programs right. Done well, these programs can drive motivation, engagement, and retention. Done poorly, they can lead to disengagement, entitlement, or even compliance risks.

This is particularly relevant as many organisations reflect on the past year’s successes and challenges while planning for 2025. Here’s how you can design an effective program that aligns with your business goals and supports your team.

Balancing individual and team recognition

One of the most common questions is whether to focus on individual or team recognition. The answer depends on your objectives.

Individual recognition can be vital for motivating high performers. For instance, publicly celebrating an employee who has exceeded client expectations, reinforces the value of going above and beyond. This may suit your particular organisation, however, overemphasising individual success can lead to unhealthy competition. It needs to be managed carefully and well.

On the other hand, team recognition encourages collaboration and a sense of shared achievement, yet the high performer may feel that their contribution isn’t being sufficiently recognised, and exceptional performance may go unnoticed.

Canva, the Australian design platform, excels in this area by regularly celebrating team milestones. A balanced approach, one that acknowledges individual efforts within the context of team success, can help build a culture of mutual respect and achievement.

Avoiding entitlement: The incentive tightrope

Incentives are powerful motivators, but if overused or poorly structured, they can create an entitlement culture. For example, quarterly bonuses that become expected rather than earned can demotivate employees when withheld.

The key is tying incentives to clear, measurable goals. These should be challenging but achievable, such as improving customer satisfaction scores or completing strategic projects.

Atlassian’s flexible approach allows employees to choose incentives that align with their goals, from professional development opportunities to extra time off. This ensures that rewards remain meaningful and motivational.

Rewarding both outcomes and inputs

Many organisations focus exclusively on rewarding outcomes, like hitting revenue targets. While this drives results, it can overlook the effort, creativity, and collaboration required to achieve them.

Taking a growth mindset approach you might consider recognising different areas. For example values such as resilience and problem-solving during a particularly tough project. While these contributions may not immediately boost profits, they will strengthen the team’s long-term capabilities. Consider incorporating both outcomes-based rewards and input-based recognition to encourage balanced, sustainable performance.

Safeguarding compliance while driving results

Tying incentives to results can create unintended risks, including unethical or non-compliant behaviour. To mitigate this, your program should pair performance rewards with adherence to company values and compliance protocols.

For example, BP’s executive annual bonus is based on a performance scorecard which includes both a safety and environmental target. You can also provide regular compliance training and monitor behaviours to identify red flags early.

Building long-term engagement through tenure

Reward programs are also powerful tools for retaining talent. Recognising loyalty with tenure-based rewards, such as career development opportunities, additional leave or sabbaticals, can show employees they are valued for their long-term contributions.

Cisco, Australia's Best Place to Work in the large company category, offer a prize or experience for your anniversary as well as opportunities to connect with different teams and grow your career. These initiatives reward loyalty while aligning with the company’s strategic goals.

Connecting teams to financial goals

One of the most overlooked aspects of incentives is educating employees about how their work impacts the company’s financial performance. By building understanding and connecting to financial outcomes, employees are more likely to align their efforts with revenue and profit goals.

Commission, revenue or profit-sharing plans can be an effective strategy. When I was MD at Beaumont People we would run training for all team members on how to read financial measures to help employees understand key business metrics, creating a stronger connection between individual contributions and company success.

Practical tips for designing effective programs

1. Customise rewards: Not everyone values the same things. Some prefer monetary bonuses, while others appreciate flexible work arrangements or professional development. Tools like Reward Gateway and Flare HR can help personalise recognition.

   
   

2. Integrate peer-to-peer recognition: Have a read of this to see some solutions for apps that will help you to reinforce positive workplace culture, or simply set up a Teams or Slack channel (or the like) in your existing ecosystem.

   
   

3. Leverage technology: Digital platforms, like some of those mentioned in this article, streamline programs, offering features like real-time recognition and reward tracking.

   
   

4. Promote non-monetary rewards: Consider offering leadership opportunities, public acknowledgment, or flexible hours. These often have a significant impact without increasing costs.

   
   

Bringing it all together

As you plan for 2025, reflect on how your incentives, rewards, and recognition programs support your strategic goals. Are they motivating the right behaviours? Are they creating a workplace where people feel valued and motivated?

When done right, these programs are more than just tools for retention, they’re a foundation for sustainable growth. Let’s ensure 2025 is the year we build better, more effective ways to celebrate and motivate the people who drive our success.

_________________________________________________________________________________

Author of ‘Meaningful Work: Unlock Your Unique Path to Career Fulfilment’, Nina Mapson Bone is a people strategist, consultant, chair and keynote speaker. She consults with boards, CEOs, founders and executives on bridging the disconnect between strategy and the needs, motivations and capabilities of their people. Nina’s executive career has spanned three continents and diverse sectors. She was previously the Managing Director of Beaumont People, where she led a period of significant growth for the organisation, during which it was recognised with multiple awards. For more information visit www.nmbpeoplestrategy.com.au