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Rewards and incentives: how they’re different and how to use them


You could easily conflate rewards and incentives. And, honestly, we’d forgive you for that. Their specific roles, and how they interact, often causes a bit of confusion.

To quickly illustrate the difference, a handy recall trick is that incentives say “do well” and rewards say “well done.” Incentives tempt employees to go the extra mile and push for crucial results. The rewards are what thanks employees for hard work, whether they’re linked to an incentive or not. They’re not mutually dependent even though they’re often used in tandem.

This blog goes into more detail about the difference between the two, when you’d use them, and how employee recognition fits into the mix.

Rewards clarified

Rewards are the actual item that gets dished out to congratulate staff for exceptional success.

They’re there to validate and celebrate performance. Rewards are most often dispensed for achievement, like taking valuable projects live or crossing a sales threshold.

Create trophies

Rewards are personal trophies when they’re dispensed for achievement. Mementos of an employee’s own excellence. Reminders of the exceptional things your staff are capable of.

Trophy value has two major effects. Vitally, staff who get these rewards are more likely to put the effort in to achieve again the future. Equally, all staff are shown that outstanding effort is appreciated and validated by managers.

Question cash

Cash is a common reward, but it’s not always effective. We’ve talked about this in our blog before, and it’s still just as true; cash is extremely suspect as a reward.

It has a bad habit of blending into the background noise of life. It’s not so easy to separate the part of your monthly pay that was a reward and which part was your gas bill. Especially when they’re both paid into the same current account.

Making trophies means putting cash aside as a reward.

Incentives summed up

An incentive is, essentially, something that’s designed to extract a desired behaviour by offering a reward ahead of time. For employees, that’s almost always some kind of professional performance. Rewards are promised in exchange for the exceptional performance once an objective is met.

They’re most common in sales teams, but any teams with measurable performance could employ an incentive scheme. You might try to decrease customer complaints, improve efficiency on a factory floor, get your fleet driving more safely, or even increasing personal training course completion.

The rewards are what spices up the targets to give your employees a bit of added impetus to reach their goals.

Where recognition fits in

Recognition doesn’t require you to use a reward. Although, it can include issuing a reward alongside recognition. The reward is a little amplifier to the recognition. A tangible reminder of what’s valued in your company.

Best practice for recognition is to tie to your values, not just performance. This is where it starts to diverge from rewards. While every company’s values should in some way reflect achievement, nailing your colours exclusively to the mast of KPIs is a dangerous game. We’ve got a whole blog post on why obsession with that is a poor idea here.

Employees should be recognised for going above and beyond to exemplify your company’s values and improve your company culture. Regardless of whether that’s tied to a KPI. That’s how you build a stronger company culture for the future.

Recognition doesn’t need a reward

Because recognition is values driven, it doesn’t need to be associated directly with an award. Peer-to-peer recognition, especially, doesn’t have to accompanied by a reward.

The purpose is to create camaraderie between staff under the umbrella of your company’s values. To create a workplace where ethical, virtuous behaviour is encouraged and is seen by staff to be valued.

When filtered through values, recognition has value to your business that doesn’t need to be associated with rewards.

In summary. rewards are the actual products you use to highlight performance. An incentive is promising that reward ahead of time in exchange for achievement. Recognition is the acknowledgement of effort or performance, and can include a reward if you choose.