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5 Best Strategies to Manage Employee Performance and Reward

How to craft a holistic recognition and rewards people strategy which increases engagement and motivation and boosts overall performance

Understanding which kinds of rewards to use and when can be a difficult balancing act. Rewards are a crucial tool for encouraging employee engagement and motivation, and when used wisely can lead to significant improvements when managing employee performance

This guide will explore why rewards are crucial to any company’s performance management strategy, and how they can be used most effectively by following some simple rules.

Why use rewards? Core practices and key benefits of an employee performance and reward strategy

People are definitely a company’s greatest asset. It doesn’t make any difference whether the product is cars or cosmetics. A company is only as good as the people it keeps.

Mary Kay Ash, founder of Mary Kay Ash Cosmetics, Inc

The nature of how businesses use rewards has undergone radical changes in recent years. The events of 2020 have accelerated these changes, as companies increasingly move towards a system of rewards that goes beyond annual bonuses. This Pavlovian approach has been extended to encompass the need for a focus on well-being, delivering a deeper meaning to employees who have faced unprecedented uncertainty.

Deloitte understood this trend towards meaningful work as a reward unto itself in its report on rewards from 2019. The report stated:

“A recent study that asked 2,400 professionals what inspired them most at work found that “the nature of the work itself” came in first, followed by “the ability to learn, grow, and progress.” This shift from rewards to relationships is critical to creating and embedding a workforce experience that stands alone as a differentiator in attracting and retaining the high talent workers of tomorrow.”

When used effectively, strategies to manage employee performance and reward can:

  • Boost employee confidence
  • Increase motivation
  • Improve job satisfaction
  • Encourage the replication of positive behaviours
  • Create greater cohesion between employee and their colleagues
  • Increase productivity
  • Develop employee’s ability to innovate
  • Reduce staff turnover
  • Improve the overall happiness of the workforce

When putting together a strategy for employee rewards, consider the following questions:

What is the difference between intrinsic and extrinsic rewards?

The two key types of employee reward are extrinsic and intrinsic. Extrinsic rewards can be measured tangibly, such as end-of-year bonuses or increases in salary. Such rewards have long been in a business’s rewards arsenal, although are not without their downsides. 

While it’s fair to say most people like money, bonuses and other similar rewards are baked into the consciousness of employees. Often, there’s an expectation bonuses will be given out, and they don’t have the desired effect in terms of improved performance and motivation.

Intrinsic rewards, on the other hand, are rooted in the concept outlined by Deloitte. These relate to feelings rather than measurable assets, such as pride in one’s work and a sense of accomplishment. They are also “cost-free” to the organization, and can be used as part of a constant strategy of employee performance and reward.

What is the best form of motivation?

Business leaders and managers who wish to use rewards effectively should understand the circumstances and choose the appropriate reward mechanism. For example, if an employee is performing a laborious task, extrinsic rewards might be the best option to motivate them.

On the other hand, involvement in a project which gets employees to draw upon their latent passions will deliver motivation through the act itself. The opportunity to develop on a personal as well as professional level brings with it its own feeling of satisfaction.

What are the key reward principles?

A successful strategy for employee performance and reward should be built around creating a positive and natural reward experience. How this manifests itself will vary depending on the nature of the business and its employees. The general principles, however, are universal.

Employee rewards should:

  • Work towards maintaining/improving levels of performance
  • Motivate the workforce in order to maximize organisational success
  • Demonstrate the company’s appreciation for a job well done

Do rewards disrupt teamwork?

Rewarding teams for their collective effort can be a great way to build cohesion between employees, provided that the rewards given are allocated evenly between the team members. If rewards are distributed unevenly through a team, employees can get the feeling that management is playing favourites. This undermines the unity and cohesion collective rewards bring with them.

Used correctly, and team rewards can help to stimulate development and build trust between colleagues. Morale is therefore boosted across the team, and the individuals within it will feel a greater sense of connection.

Now let’s take a closer look at five of the best strategies businesses can adopt in order to manage employee performance and reward the most effectively.


1. Create a culture of recognition

If you don’t create a great rewarding place for people to work, they won’t do great work

Ari Weinzweig, founding partner of Zingerman’s Community of Businesses

Building a strong core company culture that values recognition not only motivates existing employees but also attracts and retains top talent. Employees who feel valued are far more likely to be motivated to deliver their best and commit to going the extra mile. As a consequence, businesses can expect notable reductions in employee turnover.

A culture of recognition should begin at the top of the organization. That is to say, recognition should be embodied at the executive level down to the employee on the shop floor. Managers and team leaders should take the lead and demonstrate recognition consistently and frequently. With senior management modelling expected behaviour, employees are able to see for themselves how and when to offer recognition themselves.

As Renato Libric points out in his article for Forbes, a culture of recognition revolves around demonstrating appreciation: 

“Don’t be a company with a “punch-in, punch-out” mentality. You have to grow to become the company that people will stick by in times of crisis, not the business people dream of leaving. If you harvest an environment that makes employees feel appreciated, you may find it makes your job easier in the long haul. And they’ll come to appreciate you more, too.”

2. Tie the company’s success with the employee’s success

Develop Personal Development Plans (PDPs) in coordination between managers and employees

Alignment between the individual and the company should begin the day they join the company. Understanding their strengths and weaknesses – along with their goals and career ambitions – is fundamental to ensuring their growth fits in with the strategic aims of the organisation. 

Personal Development Plans (PDPs) provide the ideal framework on which managers and employees can build this alignment. Creating a Personal Development Plan helps to:

  • Create realistic development objectives based on existing skills
  • Allows employees to hone and refine their existing abilities
  • Helps employees expand beyond their comfort zone to develop additional skills complementary to their current skill stack
  • Boosts employee confidence and well-being by encouraging ongoing learning
  • Develops an employee’s self-awareness by giving them insight into areas where they can improve

Offer employees Study Days

Study days are an effective way to signal to employees that their personal and professional development go hand-in-hand. Some businesses allot a specific number of fully paid study days when staff can take the time to focus on improving existing skills or developing new ones. 

Make sure that the employee decides for themselves what area they wish to focus on studying. Giving them ownership of how they spend this time affords them the confidence that they are trusted by the company to make the right decisions.

Study days complement more traditional approaches to coaching and mentoring which allow employees to feel in charge of their career destiny.

3. Engage with employees frequently

Managers and team leaders who fail to engage frequently with employees are less likely to identify good performance as and when it happens. Once the moment has passed, rewards or recognition feel like an afterthought and lack the power to boost similar levels of performance throughout teams and departments.

There are two key approaches to guaranteeing frequent engagement between managers and employees: regular check-ins and monthly appraisals. By planning and coordinating these through performance management software, managers can make sure these are conducted consistently. It’s easy to let the day-to-day grind get in the way of frequent conversations, so using push notifications will help to make sure these meetings don’t fall by the wayside.

Regular check-ins

Frequent one-to-one check-ins are an essential tool for monitoring ongoing performance issues. When managers and employees discuss performance on a regular basis, issues are flagged early and great performance isn’t overlooked. They help to make sure expectations are always clear, and at the same time regular contact breeds familiarity and helps strengthen relationships.

One-to-one check-ins have the added advantage of shedding light on the performance of an employee’s colleagues. An employee who has gone out of their way to help someone else who is struggling might not mention this in their own check-ins. But the recipient of this help may well bring this to light when discussing their own performance. In this way, check-ins help managers and team leaders to gain a holistic insight into the inner workings of their team, and which employees stand out from the crowd.

Using a performance management dashboard helps managers schedule one-to-one check-ins so that these sessions are skipped. Automatic distribution of emails, calendar invites and reminders keeps these meetings front and centre of daily planning. Additional analytic and reporting tools mean that managers can extract the relevant data from these meetings to better understand long term performance.

Monthly and quarterly reviews

Many businesses typically eschew the traditional approach to annual reviews and appraisals in favour of quarterly, or even monthly, reviews. By increasing the frequency of the review process, managers and employees alike are able to focus on issues of performance and productivity while the relevant context is still fresh in the mind.

These reviews are more in-depth than regular one-to-one check-ins, and as such are likely to tie more deeply into an employee’s overall performance in a wider context. Whenever relevant, such reviews should call back to their Personal Development Plan (or, if they’re underperforming, any Personal Improvement Plans which have been adopted). 

As with regular check-ins, monthly and quarterly reviews can be easily set up and scheduled via performance management tools. Managers and team leaders can save time by creating custom templates tailored for individuals, teams and roles. These templates can also be used to repeat reviews based on previous case studies and criteria, for instance when dealing with under-performers.

4. Encourage peer-to-peer rewards

Manager-to-employee rewards should be considered as often as possible and come assigned with a certain amount of pedigree. But peer-to-peer rewards shouldn’t be overlooked, as these are highly effective for strengthening relationships between colleagues. 

Employees often have a greater insight into the achievements of the people they work with, so a system of peer-to-peer rewards can be very enlightening for managers and team leaders. As such, they should make an effort to encourage their workforce to recognise one another’s achievements in a public manner.

Performance management tools can help facilitate peer-to-peer recognition throughout the company. A digital-based rewards scheme built into the software allows employees to award performance badges to each other. This could be for going above and beyond expectations on a certain project or recognising someone for helping to mentor a colleague. 

5. Diversify the range of rewards available to team leaders and managers

Finally, don’t be afraid to think outside the box when developing a strategy for employee performance and reward. There are lots of inventive options for business leaders looking to show gratitude for the hard work of their workforce.

Some approaches to rewards worth considering include:

  • Offer customised gifts
  • Set up a virtual or real “Wall of Fame” for top performers
  • Provide access to new hobbies and activities
  • Offer gift cards and free credit for essential services
  • Set up fitness classes and other healthy activities
  • Reward the office with a “Bring your dog” day
  • Deliver one-on-one mentoring sessions with company executives
  • Set up a nap area/a space dedicated to relaxing
  • Half day Fridays
  • Get managers to write LinkedIn recommendations