The two different currencies for reward
Whenever we think of ‘reward’ in employment terms, we often think of the salary we are giving to our people. The salary is what is referred to as the transactional (financial) reward.
This is a given for any employment that takes place within the organisation. The competing factor here, for organisations, is the additional financial benefits the employer gives, such as health insurance, company car, gym memberships, and so on.
One of the vital ingredients of any effective reward strategy is the position and strength it has to attract, retain and motivate people. Over the recent years, the concept of non-financial (referred to as relational) rewards has been growing in importance, specifically because of the need to remain competitive. However, many organisations still continue to rely solely on financial rewards.
Albeit financial rewards being an important influence in employee recruitment and retention, employers need to start making greater use of a different currency for reward.
Relational rewards may include achievement, recognition, praise and development opportunities. It is easy to be cynical towards these types of rewards but these may also compensate for poor salary progression. Relational rewards relate to learning and development, and the employment experience companies give to their staff. They focus on the human needs and need to be adapted according to each employee.
We all know that employees’ expectations are higher nowadays and non-financial rewards can give them something which is more tangible in the way they feel.
There are many forms of relational rewards – some are as simple as managers saying ‘thank you’, others may take the form of declaring employees as the ‘employee of the month’.
This approach comes with a number of benefits to the organisation:
- Cost-efficiency (recognising employees by thanking them for the good work they’ve done, doesn’t cost anything)
- Employer branding (the total reward approach makes a statement about the organisation and the culture it has)
- Retention (we have all heard of the importance of building affective relationships with employees – non-financial rewards aims at reinforcing this as it focuses on extrinsic forms of reward)
- Constant and immediate (relational rewards can be provided to employees on an on-going basis and employers don’t need to wait for the next pay review or appraisal to give them a pay rise or bonus)
Looking at reward from a broader perspective can give a more positive experience for employees and employers. Combining both transactional and relational rewards creates a powerful reward system which puts an organisation in a greater competitive advantage. Having said this, treating employees fairly, respecting them and communicating with them regularly and consistently, should not be seen as a ‘reward’ but should be the norm for any organisation.
Is your reward strategy transactional or relational?
About the author(s)
Maria Zahra is Managing Director of SurgeAdvisory. She has fifteen years of human resources and business advisory experience. She has recently completed her research and studies in Reward Management (Chartered Institute of Personnel Development).