A good reward strategy determines why, when, and for what performances, behaviors, and moments You reward them. This prevents rewards from becoming mere extras without a clear effect on motivation and engagement.
Setting up a reward strategy starts with the organizational goal. Then you determine which behaviors fit within that goal, which forms of appreciation and reward you implement, how much budget is available, and how you measure the results. In this step-by-step guide, you’ll learn how to practically approach this.
What is a reward strategy?
A reward strategy is the set of choices with which an organization determines Which achievements, behaviors, and milestones are recognized and rewarded, for whom, at what time, and within what budget?.
A strong strategy connects four elements:
- organizational goals;
- desired behavior;
- appreciation and rewards;
- measurable results.
This means that a reward strategy goes beyond an annual bonus scheme. Personal recognition, development opportunities, points, team rewards, and non-financial rewards can also be part of the approach.
Importantly, this means that There are different levels of appreciation and reward for different roles. Appreciation makes it clear why Someone’s contribution to that is important. A reward can give that a tangible form. A good strategy uses both consciously.
Step 1: First determine what goal you want to achieve
Start with: “What problem do we want to solve or what behavior do we want to strengthen?” Possible targets include:
- retain employees for longer;
- improve collaboration between teams;
- strengthen desired behavior around core values;
- recognizing achievements;
Preferably choose one or two main goals. If a program is supposed to improve retention, productivity, innovation, well-being, and culture simultaneously, it becomes virtually impossible to determine later whether it works.
Furthermore, a reward strategy should align with your broader HR policies. In practice, this means making a conscious choice between general best practices and what is specifically suited to your organization. Read more about this in Best fit versus best practices for your valuation policy.
Step 2: translate the goal into concrete behavior
A goal like “more engagement” is still too abstract to reward. Therefore, make it clear what behavior you want to see more of. For example, if you want to encourage collaboration, reward behavior such as:
- actively helping a colleague;
- sharing knowledge with other teams;
- contribute to a common result;
- taking responsibility outside of one’s own task;
Do you want to strengthen customer-oriented behavior? Then describe the concrete behaviors that go along with it. This step prevents managers from rewarding based on personal preferences. Employees must be able to understand why certain behavior is recognized.
Step 3: Determine which rewards fit your goal
Not every achievement deserves the same reward. An employee who has been with the company for five years is valued differently than someone who helps a colleague out or completes an important project. Therefore, use different forms of rewards.
Step 4: Determine the budget for your reward strategy
A reward budget doesn't have to be complicated, but it must be limited in advance. First calculate:
Number of employees × available budget per employee per year = annual base budget
Then divide this budget over several moments and goals. For example:
- structural valuation;
- work anniversaries;
- exceptional achievements;
Do not automatically reserve the same amount for each category. A small, frequent reward can be more effective in daily behavior than one large annual reward.
Furthermore, look beyond the direct costs of rewards. Also consider management, communication, any software, and the time of HR and managers.
Step 5: make the rules of the game transparent
A well-intentioned reward system can work counter-productively when employees perceive it as arbitrary. Therefore, establish in advance:
- for which someone can receive a reward;
- who is allowed to award rewards;
- which rewards fit at which moment;
- or that employees should also be able to appreciate their colleagues;
- which maximum budgets apply;
- how exceptions are handled.
Transparency means that differences can be explained. This prevents frustration and comparison between one another. You can read more about this in How to prevent resistance to rewarding employees.
Step 6: Make rewarding part of daily work
A strategy on paper does not change behavior. Managers and employees need to know when and how to give recognition. Therefore, make it as simple as possible to recognize desired behavior immediately.
Don't wait for evaluation meetings or the annual bonus round alone. If someone does something today that you as an organization find important, today is also the most logical moment to make that visible. Structural appreciation requires repetition. That's the difference between isolated compliments and a real culture of recognition.
In larger organizations, technology can help to implement agreements consistently. The valuation platform is especially useful when individual initiatives become difficult to manage, multiple teams or locations are involved, and HR wants to gain insight into usage and results.
Step 7: measure whether your reward strategy works
A reward strategy is truly strategic only when you determine in advance what success means. Therefore, do not just measure how much rewards are being spent; look instead at:
- participation rate;
- frequency of recognition;
- number of active users;
- employee satisfaction;
- eNPS;
- voluntary staff turnover;
Before the start, take a zero measurement and then compare the results at fixed intervals, for example quarterly. The blog about Measuring employee engagement with 7 KPIs provides a practical framework for following up on these results.
When is a reward strategy successful?
A reward strategy works when employees understand what behavior is valued, why it happens, and when they are eligible for it.
A successful approach therefore has five characteristics:
- targeted: rewards support clear organizational goals;
- Honestly: criteria are transparent and consistent;
- Personally: employees have a choice where possible;
- structural: Appreciation takes place all year round;
- measurable: HR can track what is being used and what results are changing.
A digital system can help with this. With it, JobRewards platform You can centralize appreciation and rewards and at the same time gain insight into how employees are using the program.