How Does an Employee Reward System Promote Organizational Performance?


Recognition and rewards are powerful workplace motivational tools, according to Sherry Ryan, a training specialist at Weyerhaeuser Company. Employee rewards can be tangible or intangible, and may include financial bonuses, recognition, an increased decision-making role or the opportunity for professional development. Positive recognition in the workplace has several benefits for a company, namely employee retention. Employee reward systems encourage workers to become more motivated to achieve higher levels of performance, notes Ryan.

Organizational Goals

Employee reward systems can help employers achieve their organizational goals. However, employers must first identify each objective clearly before developing tangible and intangible reward systems. Important goals such as employee retention and job satisfaction, performance improvement and employee motivation can be achieved by identifying the desired outcome of employee reward programs. Company executives and managers that align their organizational objectives with employee reward systems are likely to experience repeated instances of improved employee performance. Employee reward systems should not be based on seniority; instead, all levels of workers should be encouraged to participate.

Employee Retention

High company turnover rates can be reduced with a good employee reward system. Tangible and intangible forms of rewards include cash bonuses or gifts, which can be in the form of tickets to a show or sporting event and gift certificates. These forms of reward systems help employees feel appreciated in the workplace. Employee recognition has a greater influence on employee performance over merit-based salary increases, which are incremental. The relationship between pay, employee motivation and performance is less significant, according to the "Ivey Business Journal.”

Organizational Culture

Companies that provide their employees with intangible rewards, such as opportunities for professional development, recognize the individual skills and abilities of employees rather than focusing on their duties. "Paying the person” rather than the job offers numerous advantages to workplace culture. Instead of simply promoting workers from one hierarchy to the next, helping employees develop their professional skills can transform an organization’s culture into one that fosters a highly talented workforce, according to the "Ivey Business Journal.”


Implementing employee reward systems such as bonuses and stocks adds to a company’s flexibility and effectiveness. Rather than using merit pay, which can be costly to a company, motivating workers through a bonus system has the advantage of directly benefiting employees and increasing a company’s performance. Employers can still use bonus systems during the strategic stages of a company’s growth where a rapid change may be necessary. Bonus systems can be developed to help a company meet its short- or long-term objectives and market shares.

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