An HR Glossary for HR Terms
Glossary of Human Resources Management and Employee Benefit Terms
What Are Tangible Rewards?
Tangible rewards are rewards that an employer or manager gives an employee to recognize and thank them for a job well done. They are given as motivation and are contingent on desired outcomes being achieved. Tangible rewards can be financial or non-financial, but they must be something material of value and/or meaning that can be used by the employee for their benefit.
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What Are Examples of Tangible Rewards?
Examples of tangible rewards include:
- Pay raise
- Cash bonus
- Gift card (Amazon, local spa, restaurant, etc.)
- Gym membership
- Free merchandise (apparel, a watch, Apple AirPods, concert tickets, etc.)
- Food basket
To illustrate, let’s say Trisha greatly exceeds her quarterly sales goal. Her department manager decides to reward her with a large gift basket full of local goods. This is done to recognize her accomplishment and to motivate the other salespeople to try to achieve the same results during the next quarter. This is an example of a tangible reward.
Examples of rewards that are not tangible include:
- Praise from a manager
- Company-wide recognition
- Admittance to a new training program
- A coaching program
- Flexible workplace hours
On the other hand, let’s say Trisha’s department manager praises her in front of the CEO in a company-wide meeting. Everyone claps and congratulates her for going above and beyond. This is considered to be an intangible reward.
What Are the Advantages of Tangible Rewards?
There are many advantages of giving tangible rewards to employees in an organization, the most apparent one being that it recognizes and expresses appreciation for good performance. This tangible show of appreciation tends to translate into higher employee motivation and a continuation of high performance.
There are other strong advantages of giving tangible rewards:
- Employees gain a deeper loyalty to their employer because their hard work has paid off through acknowledgment and gratitude. This has a strong impact on employee retention rates.
- The confidence of employees grows stronger, which encourages them to contribute more in meetings and find solutions to problems.
- It’s a way to direct employee (and, therefore, the organization’s) focus and performance.
Overall, tangible rewards are a great investment into individual employees as well as the entire company. To demonstrate this point, let’s take a look back at Trisha’s example. After she received the gift basket, she rallied behind and cheered on her teammates to exceed their own sales for the next quarter. In the end, two others did so and also won gift baskets.
Trisha was noticed for not only her sales record, but for the respect she earned from others in her department. As a result, management made her the team lead.
What Are the Possible Downsides of Tangible Rewards?
There are a few possible downsides of tangible rewards, most notably that they have a short shelf life. This means the motivation to earn such rewards may not last too long, as employee expectations change.
Going back to Trisha, one day her team grows bored of gift baskets and wants gift cards instead. That’s not a big downside, but if Trisha’s salespeople begin to lose interest in making sales goals without having a tangible reward hanging over their head, she now has a problem on her hands.
Other possible downsides of tangible rewards include:
- They increase business costs.
- The program takes time to plan and carry out.
- The distribution of rewards may be mistaken for bias or favoritism, especially if the reward system isn’t consistent and ongoing.
Which Tangible Rewards Do Employees Prefer?
It can be difficult to know which tangible rewards employees prefer because everyone has different tastes, expectations, and motivations. However, Incentive Concepts has reported a cross-section of findings about what is generally preferred.
- 62% prefer tangible rewards (even small ones) over recognition or other intangible rewards.
- Cash is the most popular reward, with gift cards coming in second.
- Employees value being able to choose their reward among various options.
- The presentation experience of receiving an award matters.
It is important to note that tangible rewards should not replace legitimately earned promotions or other leadership roles. That’s because such intangible rewards are intrinsically better at enhancing employee engagement, company commitment, and overall satisfaction for the long term.