Incentives: The Importance of Rewarding Your Employees

07/13/2016 06:07 pm ET Updated Jul 14, 2017

Following years of hard-fought negotiations by labor interests, the minimum wage was recently raised in several U.S. states this year, and the impact has been evident. Not so much an economic impact, or even the social im-pact that will help make life easier for the thousands who have experienced wage stagnation through the years.

Instead, this impact has to do with motivation, the rewards and incentives that help drive productivity.

Multiple research studies and surveys across the years have shown that feeling appreciated is a key driver of employee engagement in the work-place. Undoubtedly, these feelings start with compensation -- an unfair salary can discourage even the most motivated employees.

However, any good manager will tell you that appreciation extends far be-yond fair wage and salary increases. There is much more to motivation and rewards than cold, hard cash. Having a clear understanding of this fact can make all the difference in the world when it comes to a company's bottom line and its ability to attract and retain great talent.

According to Dr. Jeremy Dean, a psychologist and founder of PsyBlog, re-wards can have a strange effect on motivation. His conclusions in this space are supported by and drawn from facts gleaned from a study con-ducted by psychologists Mark R. Lepper and David Greene from Stanford and the University of Michigan.

The study analyzed the behaviors of pre-school children between three and four years old who enjoy drawing (the key word being "enjoyed"). Kids were divided based on three different conditions: Some kids were told they were going to receive an award if they were part of the drawing test. Other chil-dren were not told about the reward until after the drawing activity was fin-ished. Another group didn't receive a reward at all. The test was conducted over time.

The study found that the children who expected a reward had decreased the amount of spontaneous interest they took in drawing, while the other two group of kids -- a reward after the fact or no reward at all -- were more motivated.

There exists a similar motivational outcome mechanism in the minds of adults. Now, clearly a reward system for employees should be available in organizations large and small. However, it is very important that companies have a better understanding of their employees and consequently of what these rewards should be and how they should be awarded. After all, re-wards should motivate people, not inhibit their spontaneity.

A Washington Post article from last year made some excellent observa-tions regarding rewards and incentives in the current workplace. It noted that the "annual raise was turning into a relic of the pre-crisis economy as companies turn to creative -- and cheaper -- ways to compensate their employees." Companies have been upping their benefits expenditures not only because it makes financial sense, but also because employees' priori-ties have change over time. For instance, some people place great value on schedule flexibility and health care. As a matter of fact, beyond normal healthcare coverage, ancillary health and wellness packages are also in high demand as key benefits package components.

(This, plus pet insurance.)

However, rewards should go beyond all those nice perks and they should translate into things that are truly fundamental to all employees: a great work environment. This may sound a bit cliché, but the reality is that people who love what they do and are surrounded by an environment that stimu-lates them every day is as important as tangible rewards. A great culture is its own motivation.

There are many ways to reward employees, and one of those ways is by building a corporate culture that not only recognizes good work and behav-ior with nice perks and words of encouragement, but also that provides a setting where people can be heard, lets them take ownership of their work, makes them feel they have a purpose and gives them an opportunity to grow in their career and at a personal level.

Gifts, rewards, and incentives only hold meaning in the eyes of employees when they come from management that really makes them feel part of a team. Like the preschoolers in the study, motivation has to come from with-in. And the right environment will ensure that motivation grows over time.