This article is an excerpt from the Shortform book guide to "The Great Game of Business" by Jack Stack and Bo Burlingham. Shortform has the world's best summaries and analyses of books you should be reading.
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Do you want to show your gratitude toward your employees? What are some employee reward ideas?
Your employees work tirelessly to fulfill your purpose, so it’s good to reward them from time to time. Jack Stack and Bo Burlingham’s book The Great Game of Business offers two methods of rewarding employees to show your appreciation.
Let’s break down the two employee reward ideas that Stack and Burlingham have to see which is right for you.
Employee Reward Ideas
Offering rewards is also important for promoting engagement. People love getting rewards, Stack and Burlingham imply, and the existence of a reward interests them and encourages them to be active so that they can earn it. (Shortform note: Rewards encourage engagement by associating active participation at work with positive feelings. Receiving a reward activates the pleasure centers of the brain, providing a burst of dopamine that makes people feel happy. Thus, employees will be more engaged because they want to earn more dopamine.)
Stack and Burlingham recommend a couple of employee reward ideas:
Method #1: Institute a Bonus Program
According to the authors, instituting a bonus program is a great way to offer rewards and encourage engagement. Bonus programs reward employees with extra money when they reach certain goals. The promise of the bonus captures employees’ attention and encourages them to actively work toward the company’s goals.
These programs must operate on a company-wide level, the authors say: Everyone in the company works together to meet the goals, everyone is judged with the same metrics, and everyone gets a bonus if the company meets the goals. This method works better than offering individual bonuses because it encourages employees to work together to meet a joint goal. In contrast, when employees compete against each other for more limited bonuses, conflict and a lack of cooperation arise as co-workers see each other as threats instead of allies.
Stack and Burlingham recommend constructing your bonus program with tiers. The minimum level of effort discussed above forms the baseline that employees must meet to earn their salaries, while the company’s other goals form the bonus tiers. As the goals grow more ambitious, the bonuses that employees earn for meeting each one increase as well. Slack also advises paying out the bonuses every few months. This structure helps employees remain engaged throughout the year—the more frequent payouts keep them interested, while the increasing bonuses encourage them to remain active.
Method #2: Offer Equity
Stack and Burlingham also recommend offering equity as a reward to employees.
(Shortform note: Equity refers to the value of a company, or how much money the owner would make if all the company’s assets were sold and all its debts paid off. When a company offers equity, it gives its employees percentages—or shares—of company ownership. Employees can then sell their shares, with the value of the shares fluctuating depending on how successful the company is.)
According to Stack and Burlingham, offering equity encourages engagement by directly connecting employees’ success with that of the company: When employees work hard to help the company succeed, the company’s value increases, thereby increasing the value of their shares. The ability to influence the value of their reward interests employees and encourages them to be active in improving the company.
However, the authors caution that offering equity is only truly effective in an accessible work environment. Employees must understand what factors contribute to share value—such as fluctuations in the market—or they’ll get upset when their share price is temporarily falling or won’t appreciate having equity.
|Equity and Participative Management|
Equity is a particularly effective reward for encouraging engagement and making companies more successful. Studies show that businesses with employee stock ownership plans—also known as ESOPs—grow faster, perform better, and retain more employees than their counterparts. ESOP companies are also 75% less likely to go out of business, making them much more resilient in the face of economic hardship than companies that don’t offer employee equity plans.
Equity is so effective because it literally gives employees ownership, a privilege that provides not only financial benefit but also the ability to vote on how the company is run. Thus, employees with equity are able to directly influence the company at the highest level. As discussed previously, this influence is a strong motivational force and encourages employees to work hard to help the company succeed.
Equity is powerful on its own, but when paired with participative management, it’s even more so. Participative management allows employees to not only have a vote on major company issues but to also have a say in day-to-day operations. This extends employees’ sense of influence, motivating them further.
To start having a more participative management style, include employees in important meetings and regularly interview them for feedback on how the company operates. Discuss possible solutions to problems with employees. To be effective, this management style may also require some education—part of an accessible work environment, as Stack and Burlingham recommend—so managers can better encourage employee participation and employees can participate more effectively.
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- The best and most efficient way to create a successful business
- Why employees should see the company as theirs rather than just somewhere they work
- The principles of fostering employee ownership