Why you shouldn’t link pay, performance and recognition

It’s important to understand and apply the difference between recognition and pay.

When rolling out a recognition programme, it’s not uncommon for organisations to try to connect the dots of recognition, performance and pay/compensation.

After all, when putting budget aside for a recognition initiative, HR will be under scrutiny to show how it delivers financial and performance improvements.

However, for recognition to be most effective, it’s important to keep it distinct from pay while ensuring any appreciation of performance is always part of an integrated recognition strategy.

Here’s why this approach is so important.

Keeping pay and recognition distinct

Employees need to be paid well to survive, and it's crucial this need is met for a feeling of immediate security.

They should also have access to the comfort blanket of relevant rewards and benefits so aren’t in a state of daily “survival”, but are instead having their fundamental financial, physical, and emotional security needs addressed.

Once this level of security has been provided, some organisations choose to provide further pay/compensation as a form of employee recognition, in response to good work or loyalty perhaps.

But pay and recognition should never be linked.

This is because compensation and benefits are transactional by design whereas recognition is far more magical – helping employees to feel special, secure, cared-for, valued and included.

If an employee only ever associates receiving recognition with a pay rise, then the magic and meaning are lost, as are the many benefits recognition can bring.

When recognition is given frequently, in a meaningful way and separate to compensation, employees feel appreciated, safe and a strong sense of belonging, and this naturally improves company-wide engagement and performance levels.

Performance-based recognition

It goes without saying that employees who perform well and ‘go above and beyond’ should be recognised.

But, once again, there shouldn’t be a link made between giving performance recognition and a pay increase or bonus.

After all, not all organisations can increase compensation or add benefits each year.

Every organisation, however, can practice genuine recognition so all employees feel seen, valued and appreciated.

Recognising and rewarding performance needs to be thoughtfully executed so that it’s meaningful, genuine and tailored to the individual.

The moment can be further elevated by inviting colleagues and managers to share in the moment and where appropriate, an award or gift can be provided such as experience-based gift certificates, merchandise, and symbolic awards - delivering far greater meaning than a cash bonus.

It’s also important to consider when to give performance-based recognition.

It’s all too often focused on sales performance but, in reality, it should be given to any employee who demonstrates exceptional performance or overcomes adversity.

Integrated recognition is crucial

Finally, for recognition to truly deliver the business benefits an organisation craves – from greater productivity and improved retention through to increased profitability - recognition shouldn’t just be given for ‘above and beyond’ performance.

Leaders must seek to make recognition integrated into everyday culture and this means that appreciation becomes second nature – given for everyday effort and important milestones/anniversaries as well as great performance.

When organisations integrate recognition and make it part of the everyday experience, employees are 15 times’ more likely to thrive at work.

Don’t stifle the power of recognition

It’s important to recognise and reward performance together with everyday efforts and milestones, however pay and recognition should always be kept distinct otherwise the power of recognition will simply get lost.

The minute recognition becomes compensation, it becomes transactional.

Recognition, on the other hand, is about nurturing feelings of security, belonging and appreciation – the foundation on which employees truly start to thrive.