I am recently enamored of Steve Kerr’s new book Reward Systems: Does Yours Measure Up? Steve is currently the Chief Learning Officer at Goldman Sachs and served previously in the same position at General Electric under Jack Welch. You may be more familiar with his oft-cited article on recognition rewards: “The Folly of Rewarding A While Hoping for B.”

Steve’s “definition-measurement-reward” process is based on the principle that “effective reward systems induce organization members to pursue organizational goals for that most reliable of reasons: each person’s conviction that he or she will benefit by doing so.”

The process is simple – define your goal, find a way to measure it, then reward successful performance against that metric. Measurement is essential because:

“If something isn’t measured, you can’t give people feedback about it, so they can’t improve. You can’t reward the people who are doing it well, and you can’t improve or admonish people who do it poorly. Measurement also signals that something is important; if no one is tracking it, it will take a backseat to things that are being scrutinized. … Things that aren’t measured can’t be rewarded and they very likely won’t get done.”

If there is no metric for recognition, employees will believe that you don’t care about it and don’t value it. This builds into the irony of scarcity. The funds for benefits and compensation, for example, are scarce and so are doled out carefully. Recognition, however, is not scare. The irony is, because recognition is not scarce, it gets ignored.

Aligning rewards strategy with desired operational performance goals (as defined by your values, mission and strategies) will ensure you achieve your goals. Different types of rewards include compensation and incentives, prestige awards (special, infrequent awards such as a President’s Club that are limited to a few), and content awards such as recognition, feedback, and management attention.

Which system is best for your needs? Steve offers this test of a good rewards system (all of which are achieved through content awards):
• Everyone is eligible to participate – “When you make people ineligible for a reward, you take away their motivation to strive for it.”
• High visibility – to encourage others to want to achieve
• Performance contingent – and not on seniority, titles, etc.
• Timely – soon after the action being rewarded occurs
• Reversible – doesn’t build up entitlement

Take a look at your own organization. Have you defined a metric to measure every behavior you need to succeed? Have you then rewarded successful achievement of those metrics? If not, you are leaving cash on the table in the form of lost employee productivity and engagement.