New research from credit-card giant American Express has found that 95% of SMEs are routinely providing their staff with rewards – with 51% of firms citing motivation as the primary driver behind their reward schemes. According to the data, 34% of employer respondents who offer staff rewards reported an improvement in employee retention rates.

Broken down by the types of workers who receive rewards, 38% of employer respondents said that they reward high-performing employees, while 21% focus on length of service as the key benchmark and 23% aim to reward every member of staff.

Meanwhile, one-third of employee respondents feel that receiving a reward motivates them to work harder, 46% feel more valued, and 44% feel that they are recognised for their tenacity and dedication.

American Express senior vice-president Jose Carvalho said: “The conclusion to be drawn from this study is that SMEs are getting ahead of the game in terms of finding innovative ways to deliver rewards to employees and position themselves as good to work for. Ultimately this should mean better staff retention rates and thus savings on recruitment costs.”

But what are the main factors that a firm must consider when putting together a reward scheme? And – particularly for fledgling SMEs that are trying to grow – how can companies express generosity in ways that don’t adversely affect their finances?

“This whole area of rewards is absolutely fascinating,” says The Institute of Leadership and Management's CEO Phil James. “Although the American Express research doesn’t specify whether it’s referring to financial or non-financial rewards, it’s clear to me that if people accepted only financial rewards, then there would be no public-sector workers and no volunteers – so people obviously work for more than that for which they’re paid.

“If you look at the motivation theories of Herzberg, he said: ‘You won’t motivate anyone by paying them correctly, but you will certainly demotivate them if you don’t.’ Similarly, J Stacy Adams stated in his principles of equity theory that people accept how much they earn if they think that they are rewarded sufficiently for the work they do, compared to other people. So yes – it’s absolutely essential that people’s financial rewards are accurately judged. But again, evidence is suggesting that workers – particularly millennials – seem to want more from work than simply pay at the end of the month.”

James explains: “In research we’ve done at the Institute, we’ve discovered that having some autonomy over the working day is valued by everyone, no matter their generation – and that’s where flexible working emerges as a hugely attractive reward. We’ve also found that opportunities to learn and develop have significant appeal across different age categories.

“Essentially, there are loads of different ways in which you can reward people: recognition, praise, responsibility – and that last word doesn’t mean just piling more work on to employees, but ensuring they feel more valued, and have a greater degree of autonomy in the work that they do.”

However, he adds: “leaders and managers often don’t take into account that they have a great deal of scope to reward the behaviours that they want. Charles Hampden-Turner talks quite eloquently about this. Simply put, if you were trying to improve performance in a sales team, don’t necessarily reward the people with the best sales. Reward those who are more generous with their time, who are happy to coach others, who take responsibility for helping someone else to deliver the targets. If you are eager to encourage particular attitudes and behaviours, you can use rewards very, very creatively.”

For further thoughts on how to inspire your team, check out this learning item from the Institute