Six Rules for Designing Rewards (Appelo)

Employee Compensation (Pay Structure)
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Hong Sun
Management Consultant, Canada

Six Rules for Designing Rewards (Appelo)

🔥NEW A good reward system provides strong motivations for employees to maximize their contribution by up to par performance. To design such a reward system, the following 6 rules/criteria/tips should be taken into consideration:

1. Don't promise rewards in advance: Offer people recognition of good work as a surprise rather than a promise in advance so that they won't focus only on the reward or work hard just for the purpose of gaining it. Neuroscience studies reveal that humans enjoy more the activities they engage in when surprise rewards are presented, as a pleasure center of human brain (called the nucleus accumbens) becomes much more active when unpredictable patterns of rewards are received. In contrast, when someone hears that he'll get a reward for something he already likes doing, he will question whether he should enjoy that activity on its own, which explains why rewards promised in advance don't work well in workplace.

2. Keep anticipated rewards small: When certain rewards are unavoidably foreseeable, keep them small. Research suggests that expected, tangible rewards undermine autonomous motivation and decrease performance, because people attribute their good behavior to the external rewards rather than the inherent value of their work; whereas small rewards can be used as a means of stirring motivation without compromising good performance that comes from people's inherent interest in the work they do.

3. Reward continuously, not once: Rewards (unexpected and small) can be distributed as frequently as every day, rather than once a month or once per year. The most effective way to encourage consistent good performance is by reinforcing employee behavior on a continuous schedule; and when rewards are used as one of those reinforcement tools, they need to be consistent as well by being distributed on a continuous basis.

4. Reward publicly, not privately: Reward people publicly provides a way to communicate to all employees what behavior is worth rewarding and why. It also offers the rewards receivers a deep sense of pride that normally turns into strong motivation to keep their good behavior in the future.

5. Reward behavior, not outcomes: In many corporate incentive programs, rewards are promised based on achievement of a certain outcome, since leaders assume that the outcome can only be achieved if the desired behaviors occurred. Yet, this is not always the case—when people focus on only desired outcomes, they may try to find shortcuts or even learn how to cheat. Thus it should be good behavior that's to be rewarded rather than outcome.

6. Reward peers, not subordinates: Rewards need to come from not only managers, but also peer-to-peer recognition, because coworkers know better than managers which colleague deserves a compliment more than others. On top of that, peer-to-peer recognition and rewards create a positive workplace atmosphere and help to foster teamwork between employees.

Examples of applying the 6 rules by Appelo:

- A surprise compliment addressed to a colleague in a meeting for a job well done satisfies almost all six criteria. Such an incidental reward can increase people's enjoyment of work and encourage intrinsic motivation.

- Another example is the "Kudo Box" incentive program: When anyone in a company feels that one of his colleagues deserves a reward, he slips a note in a cardboard box (hence the name of the program) or sends an email to a designated central mailbox. Then a tray containing all sorts of gifts will be presented to the receiver for him to pick a reward out of it. And everyone in the company will hear about what happened on the company's intranet and through other communication platforms such as Facebook or Linkedin. This is not only a low-cost reward system that involves everyone in recognizing people doing good things, but also an effective and fun way to strengthen motivation and promote collaboration in workplace.

Appelo, J. (2014), "Management 3.0 Workout", Rotterdam, the Netherlands: Happy Melly Express.


Maurice Hogarth
Consultant, United Kingdom

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Manager, Kenya

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I fully agree with you @Maurice Hogarth on the aspect of inter-dependence between individual and tea... Sign up

Maurice Hogarth
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@Omondi: Good points. As per your example the sales team is merely the tip of the iceberg with all t... Sign up


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