How to reward top performers when money is no object

Retaining and motivating top performers are critical issues for leaders, HR practitioners and organizations in general. Given the current job market, high-performing employees have the freedom and power to pick and choose where they work. This makes finding and keeping top performers more difficult than ever.

One way to attract and retain top performers is to provide a generous and unique reward package. Organizations that recognize the importance of high performers to organizational success are putting together reward packages that are increasingly diverse and creative, differentiating rewards based on performance in a meaningful way in order to keep top talent.

A carefully planned reward program can also be an effective tool for supporting a positive company culture, motivating employees and improving retention rates. A reward program is designed to motivate people to achieve organizational and individual objectives through improved performance, providing concrete rewards for quality performance that are consistent with short- and long-term organizational goals.

Truly effective reward programs must be supported with a sound, well-conceived total rewards strategy. This means all elements — base salary, variable pay (incentives, commissions, stock), and benefits as well as the working environment (culture, job satisfaction, opportunities for growth) — must focus on attracting, motivating and retaining top talent.

Understanding high performers

Before considering how to reward them, it is important to understand high performers and what motivates them to stay with an organization. In the design of rewards programs, most employees are all lumped together, without differentiating how each are motivated.

The focus of most reward programs is on aligning employee efforts with organizational requirements and encouraging high levels of individual or team performance.

But in fact, high performers focus on what needs to be done at a level beyond expectations, with or without a reward program in place. This group works to exceed its targets, and has an orientation to achieving that is internally driven.

As a result, they look to the reward program to add fuel to their achievements, engage them in the organization and differentiate them from others. Ultimately, they want the reward systems to give them a reason to stay.

The role of rewards

Think of reward programs as internal marketing tools that drive performance and the achievement of short-term objectives.

Examples of short-term objectives include introducing new products, opening new markets, building new products or services, implementing improvements or reinforcing organizational values. Reward plans can be introduced without making changes to the overall compensation plan as a way of driving these often frequently changing objectives.

One of the greatest advantages of reward programs is that they do not run the risk of becoming an entitlement as other pieces of a compensation plan may.

Why not just more cash?

When surveyed most people will say cash is the best motivator for them. Indeed, Rajan Sodhi, marketing director for The Portables, a Vancouver-based exhibit company, says a survey of their staff showed cash awards are still the most preferred reward for performance. Money has global appeal because we all want it and we all can’t get enough of it.

When you think about it though, if money were the best motivator, wouldn’t salespeople on commission work at optimal performance at all times? Statistics show that what actually happens is the opposite.

Commissioned salespeople adjust to a certain level of income often resulting in one of two very undesirable outcomes from a cash-based reward program: (1) employees earn the same amount of money for selling fewer products and services, or (2) employees earn more money for selling the same amount of products or services.

These are two negative impacts of cash rewards. In addition, cash-based reward programs are easily duplicated, minimizing your organization’s ability to differentiate itself in the market and retain top performers.

When using cash-based rewards for significant accomplishments, or non-commissioned employees, there is often disagreement when determining the value or actual dollar amount of the reward and conflict may arise when defining what is considered performance beyond the normal scope of the job.

Leaders often expect more from their high performers, which impacts on how they are “rated” and rewarded.

In response to its employees’ preferences, The Portables rewards top performers with significant cash that is delivered in a meaningful way. The company holds a five-star annual awards dinner at an exclusive location, which everyone attends “dressed to impress.”

High performers are presented with a plaque and cash award. The top performer for the year (based on surpassing targets) becomes a member of the President’s Club for the remainder of her employment, is presented with a custom designed art piece out of glass and a “very large cash amount,” ranging from $1,000 to $15,000 depending on the level of performance. The very top performers receive more than $15,000.

The next night all President’s Club members are taken by limousine to a dinner with the president. This combined approach has an exclusivity about it that cash alone does not provide.

Why use non-cash awards?

Research shows that non-cash rewards, in the form of merchandise or travel, are more successful than money for rewarding and retaining high performers. The reasons are both emotional and symbolic.

•Satisfy our “wants” versus our “needs.” Cash or cash equivalents have a tendency to be spent on attending to everyday needs such as groceries, or bills.

Non-cash awards on the other hand have more of an ability to satisfy desires such as a new television, golf clubs or trip to an exotic destination. Satisfying an employee’s desires or “wants” should be the role of rewards and, satisfying employee “needs” should be the role of base compensation.

•Eliminate guilt. Employees will tell you that it is difficult to justify buying the objects of one’s desires when you have to pay bills and save for your children’s education. However, if incentive awards are not a cash item and can’t be converted into dollars to pay down debt, then they are not available to satisfy needs. When there isn’t a choice, there is no reason to feel guilty.

According to Dave Sinclair, a certified financial planner with the Investors Group, his organization rewards its top performers with such items as leather portfolios, palm pilots, DVD players, cameras, and home theatre systems.

•Give them something to brag about. Canadian culture does not consider it in good taste to brag about how much money we make or what our net worth is. And, there isn’t a lot of satisfaction in boasting about how much we paid down our credit card or how many overdue bills we paid off.

However, people do gain satisfaction from telling others about recent trips, a night out to the theatre or from showing off a new designer coat. Non-cash awards are tangible symbols of success and provide an acceptable and important means to satisfy an emotional need for peer recognition.

At 3M Unitec, the top performer of the year is awarded with a high-end Rolex watch at the annual banquet. Striving towards earning a Rolex is one of the ways that the organization engages its high performers. It is worn with pride and visibly indicates to others the person is a top performer within the organization.

•Memory value. Do you remember where your last paycheque went or which bills you paid with it? Probably not. Or if you do, does it elicit a pleasant memory? Again, probably not.

Non-cash incentives provide the opportunity to relive a pleasurable experience. They are memorable occasions that enable employees to recall how they felt when they earned them, when they received them and how they were presented. Non-cash awards provide a long-lasting reminder of success, efforts that went in to achieving it, and most importantly to employers, a fond remembrance of the person or company who gave the reward.

Cruise Concepts in Vancouver works with organizations to create unique and special travel experiences for high performers that the employees wouldn’t ordinarily do for themselves. “One client took their top performers and their spouses on an 11-day Baltic cruise,” says Rebecca Telfer, cruise consultant.

•Better than the rest. In a competitive labour market, cash awards can be easily topped by the competition. Non-cash awards, however, promote employee involvement, commitment and mutual goal setting. If employees help to select their own rewards, they will move mountains to achieve them.

One Toronto-based company buys its top employee a tailor-made suit and the president lends his Jaguar convertible for a weekend to give the employee a taste of what continued success can buy.

Other things companies do to reward high performers when money is no object include: a leased luxury car, all expenses paid trip to a playoff game, tuition for an executive MBA or other certification program, club membership, golf school package, an exclusive spa trip, weekend use of the company Hummer or a time share membership.

Making it work

Often high performers are not rewarded in a meaningful way out of concern for the impact on others who do not earn the same. As well, leaders often struggle with the ability to “objectively” differentiate performance in discussions with their employees despite always being able to talk with others about who the top performer is and why.

These are important considerations in making these types of approaches work and help determine an organization’s readiness for moving forward.

Organizations need to create an approach to rewarding high performers that focuses on recognizing their contributions and valuing them in ways that ensure their retention. To support this, organizations require an effective structure or process for determining who is eligible and clearly defining the criteria for these rewards.

Finally, whatever approach you take to rewarding your high performers, it must be consistent with the values, culture and leadership style of your organization.

Heather Hilliard is a senior consultant in the Vancouver office of Sage Developmental Resources. She can be contacted at [email protected].

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