If we asked a group of leaders whether they have a reward and recognition strategy, most would probably say yes without too much hesitation. They might point to their bonus scheme, annual awards, employee recognition platform, long-service awards, benefits package or the vouchers managers can hand out when someone has gone above and beyond. In many organisations, a lot of time, effort and money goes into trying to make sure people feel valued and appreciated.
Yet despite all of this, reward and recognition remains one of the most common areas of frustration we encounter when speaking to employees. Not because organisations are doing nothing, but because there is often a disconnect between what leaders believe they are rewarding and what employees see happening around them every day.
The issue is rarely that organisations have no reward or recognition in place. More often, the bigger question is whether those choices feel fair, whether they are applied consistently and whether they reinforce the behaviours leaders say matter. In our experience, one of the most useful questions to ask is also one of the simplest, because once you start to answer it honestly, a few uncomfortable but important things usually begin to surface.
What do we actually mean by high performance?
One of the first problems is that organisations often assume everyone is working from the same definition of performance, when in reality that is rarely true. We have seen plenty of situations where two managers look at the same person and reach completely different conclusions. One sees someone who consistently delivers exceptional results; the other sees someone who gets those results by damaging relationships, ignoring agreed processes or leaving colleagues to pick up the fallout.
Neither manager is necessarily wrong; they are simply focusing on different aspects of performance. This becomes particularly important when reward is involved because employees quickly learn what the organisation truly values. If somebody who consistently delivers strong results but demonstrates poor behaviours continues to receive the highest rewards, then the message becomes clear. Regardless of what the values on the wall say, the organisation is telling people that results matter more than how those results were achieved.
In last week's article, The Exception That Becomes the Culture, we explored how organisations can sometimes tolerate behaviours from high performers that would never be accepted from anyone else. Reward and recognition can unintentionally reinforce exactly the same problem. If somebody receives the highest bonus, the biggest award or the greatest recognition despite behaviours that undermine the wider culture, people notice. Over time, the exception stops looking like an exception and starts feeling like the norm.
Employees are usually far more perceptive than leaders give them credit for. They do not just listen to what leaders say; they watch who gets promoted, who gets recognised, who gets the opportunities and who seems to operate by a different set of rules. Those observations often tell them far more about the organisation's real values than any posters, leadership roadshows or carefully written internal messages ever will.
Where this works best, leaders have usually taken the time to define what good looks like in practice. They do not treat results and behaviours as two separate conversations. They recognise that sustainable high performance depends on both. They are clear about the outcomes they expect, but just as clear about the standards, values and behaviours that sit behind them, and they make sure reward decisions back that up.
Does money really motivate people?
This is probably one of the most debated topics in leadership and management. Of course money matters. People want to feel fairly paid for the work they do, and few employees will feel genuinely motivated if they believe they are being underpaid compared with the market or their colleagues. Financial reward can also be an important way of recognising contribution and sharing success.
However, in our experience, organisations can sometimes place too much weight on financial reward as the main way of motivating people. When employees talk about why they stay, why they go the extra mile or why they feel genuinely engaged, the conversation is usually much broader than pay. They talk about good managers, opportunities to develop, flexibility, trust, interesting work, supportive colleagues and the feeling that what they do actually matters.
That is not to say financial rewards do not work. They absolutely can influence behaviour, but the challenge is that they often influence whatever happens to be measured. If a reward scheme focuses entirely on sales revenue, people will naturally focus on sales revenue. If it rewards speed, people will focus on speed. If it rewards individual achievement, people may prioritise their own success over helping others achieve theirs.
There is nothing wrong with any of those outcomes in themselves. The problem comes when leaders assume that because they are rewarding one part of performance, they are somehow encouraging everything else as well. In the better examples we see, reward and recognition are treated as more than a single lever to pull. Financial reward has an important role, but it sits alongside development opportunities, flexibility, autonomy, meaningful recognition and an environment where people feel valued.
Who gets recognised and who gets overlooked?
This is one of the biggest challenges organisations face. When leaders think about recognition, they often focus on visible success: the salesperson who secured the major contract, the project team that delivered a high-profile piece of work or the senior leader who led a significant change programme. Those achievements absolutely deserve recognition, but they rarely happen in isolation.
When we speak to employees, a familiar theme comes up. Many people can name the individuals or teams who usually receive recognition, but struggle to see how quieter contributions are recognised with the same consistency. The administrator who keeps a project moving, the customer service colleague who resolves a complaint before it escalates, the finance colleague who spots a costly error, the HR professional who supports someone through a difficult period and the operational teams who make sure the organisation delivers on promises that someone else made may not generate the headlines, but many organisations would not function without them.
When this is working well, there is usually a conscious effort to broaden the spotlight. Leaders do not only recognise what is easiest to count or most visible from the top. They create simple ways for colleagues to appreciate each other, celebrate collaborative work, ask managers to notice behind-the-scenes contributions and make sure support and enabling teams are included when success is shared. They also look beyond who presented the result and ask who helped make it possible.
Recognition becomes much more meaningful when people believe everyone has a fair chance of earning it, not just those working closest to the spotlight. A useful discipline is to review awards, praise and development opportunities from time to time and ask whether the same roles, teams or personalities keep appearing. If they do, the answer may not be that everyone else is contributing less. It may simply be that the organisation is not looking widely enough.
Is your approach genuinely fair?
Fairness is often where reward and recognition becomes most complex because people naturally hold different views about what fair looks like. Take the example of a company-wide bonus. A frontline employee earning £25,000 receives a 3% bonus worth £750, whilst a senior manager earning £75,000 receives £2,250. The approach is mathematically consistent because both receive the same percentage, yet many employees will still question whether it feels fair if the message is that success is being shared across the organisation.
That does not automatically make the approach wrong. Organisations may reasonably decide that reward should reflect responsibility, accountability or market value. However, very few openly discuss the philosophy behind those decisions, and employees are then left to make their own assumptions about whether the scheme rewards contribution, hierarchy, salary level or genuine shared success.
People are often more accepting of decisions they do not personally benefit from when they understand how those decisions were reached. Transparency will not remove every disagreement, but it does build trust. The better organisations spend as much time explaining reward as they do designing it, so employees understand what is being measured, why those measures matter and whether bonuses reflect personal performance, team success, organisational performance or a mix of all three.
A practical solution is to agree and explain the principles before the figures are calculated. If the intention is to share organisational success, leaders might consider whether a flat payment, a percentage, salary bands or a blended approach best reflects that intention. There is no perfect answer, but an explicit and explainable choice is much stronger than a historic formula that nobody can properly defend.
Are managers equipped to recognise people effectively?
One of the biggest mistakes organisations make is assuming recognition can be standardised. In reality, recognition is highly personal. Some people enjoy public praise, while others find it deeply uncomfortable. Some are motivated by development opportunities, while others value flexibility, autonomy or simply having their work acknowledged privately by someone they respect.
This is where reward and recognition often becomes disconnected from reality. Most organisations try to create a centrally managed approach, but the people who usually understand what motivates an individual best are their line manager. They see the effort that goes in behind the scenes, understand the circumstances surrounding success and are often the first to spot contributions that nobody else notices. Yet many managers have very little flexibility, support or budget to respond to that knowledge, leaving them with a recognition process that can feel more administrative than meaningful.
A consistent framework still matters, but it works best when managers have some room to apply it sensibly. Clear principles, practical resources and a bit of discretion can help managers recognise people in ways that feel personal rather than simply following a corporate process. It also helps when managers ask rather than assume. A simple conversation about how someone likes to be recognised can prevent the well-intentioned public announcement that leaves the recipient wishing the floor would swallow them.
Consistency still matters, particularly where fairness is concerned, but consistency should not mean treating everybody identically. It should mean applying the same principles while allowing sensible judgement about how recognition is expressed. Good managers understand their people, and effective organisations trust and equip them to act on that understanding.
Is development one of your most underused recognition tools?
A conversation about reward and recognition often focuses on money, benefits and awards, yet one of the most powerful ways to appreciate people is frequently overlooked: development. When somebody is offered a stretch assignment, invited to lead a project, supported to gain new skills or given a genuine opportunity to progress, it sends a powerful message. It is not simply that they have performed well; it is that the organisation sees something in them and is prepared to invest in their future.
We have lost count of the number of employees who have told us that the opportunity meant more to them than the money ever could. Being asked to lead a project, take on a new challenge or develop skills for the future sends a very different message from a one-off reward. It tells people that somebody can see potential in them and is prepared to back them. Long after a bonus has been spent, people often remember who gave them that opportunity and the confidence that came with it.
Handled well, development becomes part of how people are recognised, not a completely separate process. Access to learning, projects and progression needs to be visible and fair, rather than dependent on informal sponsorship for the people who are already best known. It also needs to be more than extra work dressed up as an opportunity, with proper time, feedback and a genuine route forward.
Can performance ratings ever be truly objective?
Many reward systems remain heavily linked to annual performance ratings, yet these ratings often create an illusion of precision. Giving someone a score out of five feels objective, but the process behind that number is often anything but. Managers are human: they remember some events more clearly than others, bring different expectations and priorities, and interpret good performance through different lenses. Some place significant emphasis on behaviours, whilst others focus almost exclusively on outcomes.
When people talk about frustration with performance ratings, it is rarely the number itself that comes up first. More often, it is the feeling that the process was not applied consistently. Employees have a habit of remembering the successful project from six months ago that never got mentioned, or the difficult period that seems to have overshadowed everything else they achieved. Asking a manager to accurately summarise twelve months of contribution in a single conversation was never going to be straightforward. More regular conversations throughout the year will not remove judgement, but they do reduce the risk of a year's performance becoming a test of memory.
What makes this even more challenging is that many organisations still operate some form of forced distribution or bell curve, whether formally or informally. Managers may be expected to identify a small number of exceptional performers, a larger group in the middle and a smaller group at the lower end, regardless of the actual performance profile of the team. But what happens if a manager genuinely has a team full of strong performers? Equally, what happens if most of a team has struggled because objectives were unclear, leadership was weak or the organisation experienced significant disruption?
One thing we have always struggled with is the idea that a team's performance should conveniently mirror the size of the available bonus pot.
We have sat in calibration meetings where managers spend more time debating where people sit on a curve than discussing the contribution they have actually made. If there are only two top ratings available, suddenly the conversation becomes about choosing which two people get them.
At that point, are we really assessing performance, or are we simply administering a budget?
Employees may never see those discussions take place, but they are usually very good at recognising when a process feels driven by quotas and reward budgets rather than the work they have actually done.
At that point, the rating no longer reflects the person; it reflects the process. Employees may not know the detail of calibration discussions taking place behind closed doors, but they can usually sense when outcomes are being influenced by quotas, budget constraints or organisational expectations rather than the quality of their contribution.
A more credible approach is to separate the honest assessment of performance from the mechanics of dividing up a limited reward pot as far as possible. Regular performance conversations, different sources of evidence and clear behavioural expectations can help build a fuller view of contribution, alongside openness about any financial constraints. That will not make every decision easy, but it avoids pretending that an affordable distribution is the same thing as an objective view of performance.
The bigger question for leaders is whether ratings are genuinely helping them recognise and improve performance, or whether they have become an administrative mechanism for allocating reward. If the answer is primarily the latter, the organisation may need to reconsider both the rating process and the way the bonus pot is distributed.
So where does this leave us?
The most important lesson is that reward and recognition are not quite the same thing. Reward is often transactional, whereas recognition is emotional. One is what an organisation gives; the other is how an employee experiences it. People need both. They want to be rewarded fairly for their contribution, but they also want to feel seen, valued and appreciated for the difference they make.
That means looking beyond bonus schemes and annual awards and asking some more fundamental questions. Are we recognising visible contribution or genuine contribution? Do all functions have a fair chance of being recognised? Are managers equipped to understand what motivates their people? Are we rewarding behaviours as much as results? Do people understand how reward decisions are made, and are our performance processes helping us understand contribution or simply helping us divide a fixed budget?
Most importantly, if every bonus, award and voucher disappeared tomorrow, would people still feel valued by the organisation?