Rewards, Awards, is there a difference?

Let’s solve the puzzle, once and for all.

A clear understanding of the various instruments of reward, incentive and motivation in business can vastly improve sales and revenue outcomes. We explain the main characters and personalities at play, so that leaders can make a better informed choice. 

Business runs on reciprocity. Scratch the layers of strategy, prophecy and bravado, and you’ll find the magic of good old human nature at work. The spirit of requiting, repaying or returning a favor. Adding harmony to the daily give and take. Balancing yin with yang. And quietly, doggedly, ticking away some of the biggest boxes in business: Elevating fairness, generating motivation and ensuring sustainability across relationships and transactions.

The instinct of reciprocity manifests itself via various instruments of commerce. We’re all familiar with usual suspects, of course. Payouts, commissions, rewards, perks, awards, gifts and various others employed every day for equalizing value equations, neutralizing debt and expressing gratitude.

Here’s the big question, though: How well do we really know these cash and non-cash currencies? Most of them sound and smell so similar it can be confusing. Are they the same? Can they be used interchangeably?

The short answer to the question is no. 

In the complex universe of commerce, each instrument of motivation serves a well defined purpose, and has a unique role to play. Standardizing them with the reductionist logic “Oh, they are all just compensations with different names” would mean ignoring the richly distinct, if subtle, ways in which they differ, or the widely varying outcomes they help us achieve. 

Not all compensation are created equal.

Nor do they deliver the same impact. Leaders who understand that carry an unofficial MBA in behavioural science, and start a mile ahead of rivals. They are able to link the right compensation instrument with the right situation and the right persona and to bring out the ‘A’ game in their teams – breeding a culture of high performance and grateful loyalty.

REWARDS, AWARDS, WHAT’S THE DIFFERENCE, REALLY?

Let us see how, and where, the various instruments of reciprocity stack up in the context of everyday business.

INCENTIVES

Both the Oxford Learner’s Dictionary and the Cambridge dictionary define incentive as something - a payment or a concession - that encourages somebody to do something. Some examples of incentives are cash, game tickets or a paid holiday. An incentive isn’t part of a fixed compensation component like a salary: It is always earned. Incentives are earned by showing results on any assigned tasks, behaviours etc. Incentives are typically top-down in a company and need a review by a designated authority to approve it. 

REWARDS

The Oxford Learner’s Dictionary defines a reward as something that’s given because someone has done something good - such as being helpful to one’s team or upholding the spirit of fairness in play. Rewards may also accrue out of meeting goals, judicious decisions or dedication and perseverance: For example, a worker is rewarded financially for achieving professional targets, an athlete for years of practice, or an individual or company for investing in the right stocks. The Cambridge dictionary, on its part, defines reward as something given in exchange for an useful idea, good behaviour or excellent work: For example, there could be a reward for finishing first, for displaying empathy with strangers, for years of service to an organization, for sharing information with the police or for doing a job well. 

Popular idioms and expressions like ‘Hard work usually brings its own reward’ and ‘Virtue is its own reward’ underlines the strong action-reaction (reciprocation) concept associated with a reward. It is something we expect as a response or consequence of something we have done.

"People work for money but go the extra mile for recognition, praise and rewards”, the popular saying goes. Rewards also plug into the human need for recognition - a deep impulse for being seen, valued and appreciated for our contributions. 

If incentives stimulate and ensure future behaviour, rewards acknowledge and validate past accomplishments. In other words: Incentives are the cause providing a push, while rewards are the effect acting as reinforcement. As part of a loop where the same action can be interpreted either as an incentive or as a reward depending on where it occurs in the cycle, the two terms are sometimes used interchangeably in business.

Rewards can be implemented in both top-down and bottom-up manner - that is, they can either be determined solely by the management or influenced and initiated by employees. A hybrid approach is also possible. 

AWARDS.

Both the Oxford Learner’s Dictionary and the Cambridge dictionary define an award as a prize or sum of money given to someone for showing some results or achievement. Sources like Collins and Merriam-Webster define an award as something bestowed as a recognition of merit. Awards may sometimes be interchangeably referred to as prize, trophy, accolade, honor or distinction. 

The principal difference between an award and a reward (or any other citation) is the level of accomplishment. Awards are conferred for extremely high order achievements, for pioneering breakthroughs and for unique status in a domain or field. 

Like rewards, awards too recognize and endorse past behaviour. Unlike rewards however, awards tend to be more formal and public facing. Often, they are spectacular landmarks in the annual event calendar - making the headlines, informing the social narrative and building icons and legends. 

Notable examples of globally distinguished awards are the Nobel prize, the Academy Awards (Oscar), the Grammy awards, the Presidential Medal of Freedom (the highest civilian honor of the USA), the Legion of Honour of France, the Bharat Ratna of India and various lifetime achievement awards in community and corporate life across nations and sectors.  

While one merely receives a reward, one is decorated with an award. Awards are symbols of excellence and emblems of virtue, adorning mantlepieces as insignias of excellence, influence and trust. 

Unlike rewards, awards tend to be more symbolic in spirit, without any functional value or practical use.

Technically speaking, awards can also arise out of official decrees, such as a court awarding a decision in favor of someone, or a college awarding a scholarship to a deserving student. 

While rewards can be handed out discreetly and randomly (sometimes even without overt or obvious logic) at the discretion of the leadership, awards are usually rationalized rituals that are precisely planned and follow structured, widely publicized protocols.

Awards typically tend to be top down phenomena - usually decided by an esteemed jury bench or panel of judges drawn from dignitaries, luminaries and celebrities of society. This applies to workplace awards too, such as innovation awards, star performer awards, above and beyond awards, attendance awards and company values awards. That said, there may be some awards that come with a democratic flavor and participative component, with reviews, nominations and votes deciding the award winner. 

PAYOUTS.

According to the Oxford and Cambridge dictionaries, a payout refers to a sum of money that is given to someone - as compensation for work, statutory transfer to stakeholders or even winnings from lottery or gambling. 

In business, payout refers to an outflow of cash or equivalent value. It is a broad term that refers to the disbursement or distribution of funds, assets or benefits to individuals, investors and value providers. Payouts can take various shapes and forms depending on the nature of the transaction and the relationship with the entities involved. 

Some examples of payouts are salaries to employees, commissions to sales channels, wages to gig workers and temporary staff, invoice payments or accounts payable for suppliers, vendors and freelancers, incentives to delivery partners, bonus and dividends to employees and shareholders, cashback and refunds to customers, insurance settlement to clients, and finally - gifts and rewards which can be directed at anyone: Employees, channels, partners, associates and customers. While payouts are commonly made via currency, they can also take the form of vouchers, stocks, cryptocurrency or goods.

COMMISSIONS.

As touched upon earlier, commissions are a specific kind of payout. 

They are a type of variable compensation that’s mapped to performance and results. It is earned as a percentage or as a fixed sum on a deal generated, sale made or milestone crossed. In that sense, commission earnings are a function of organizational earnings.

Companies give away commissions against proven results - rendered by an individual in the capacity of an employee, broker, agent, associate or intermediary - and to incentivize future performance. Commissions may be disbursed monthly, quarterly or yearly.

Commissions act as a mechanism to motivate the individual, align personal financial interests with the company's larger revenue goals, and drive sales. Commissions are a popular mode of compensation in sectors and roles like sales employees and channels, real estate and insurance agents, financial advisors, trade influencers, independent contractors, agents and others. Like any income, commission income is taxable tool, although it may be governed by specific laws. 

BENEFITS.

The Cambridge dictionary defines benefits as an advantage such as a pension plan, health insurance, or a car, that a company offers to employees in addition to their pay. Collins describes benefits as health insurance, pension payments, childcare and similar - given to employees in addition to their usual salary or wage. 

Benefits assume particular importance in the modern day, a time when the war for talent is real. According to the Manpower Group, a mammoth 75% of employers worldwide are struggling to fill roles. In this context, a thoughtful and generous benefits package becomes essential for attracting and retaining top talent. Indeed, it can be an organization’s most definitive competitive edge. 

In a Glassdoor survey, around 60% of respondents reported that they strongly consider perks and benefits offered before accepting a job offer. In addition, 80% of employees prefer additional benefits over a pay increase.

Benefits are non-cash compensation usually paid to regular employees. Benefits act both as a tool for motivation, and an acknowledgement of the employee’s worth to the company. Benefits are usually not directly linked to performance. Benefits like health and retirement packages constitute an essential part of the employee employer relationship. Benefits are legally enforceable, usually mentioned explicitly in the engagement agreement, and an integral part of an employee’s total compensation calculation.

PERKS OR PERQUISITES. 

The Cambridge dictionary defines a perk as an advantage or something extra, such as money or goods, that one is given because of one’s job. Collins describes it as special benefits given to people who have a particular job or belong to a particular group. Per Wikipedia, perks are various non-wage compensations provided in addition to cash wages.  

Like benefits, perks too are non-cash considerations and compensation designed to enhance job satisfaction. Unlike benefits, though, perks are not legally enforceable and do not feature in the total compensation document. They are optional, ‘nice to have’ extras designed to lift morale, build attachment with the organization and indirectly trigger efficiency. 

Examples of perks at the workplace are car parking slots, paid time off, free meals, wellness programs, remote work provision, pet insurance, tickets to special events, parent and childcare assistance, and various others. 

Both benefits and perks are part of the employer’s overall value proposition to employees. They are intended to make a potential engagement more rewarding – helping both attract and retain talent.

ALLOWANCES.

Like benefits and perks, allowances represent additional considerations from the employer to the employee or worker. That’s where the similarity ends, though. Unlike benefits and perks, allowances are paid in currency. They are not ‘fancy extras’ but essential for meeting special expenses incurred in the course of discharging job related duties. Both allowances and benefits make it to the official records of the business, while perks usually do not. Allowances are usually paid at periodic intervals, increases take home salary and may be taxable. Note that in some cases, instead of an ‘advance allowance’, a post expense reimbursement is paid to the worker to meet the costs.  

PRIVILEGES.

The Harvard Business Review describes privilege as an unearned and sustained advantage that comes from certain core attributes drawn from socioeconomic, biological and conditioned realities. It captures the concept as a special right, advantage or immunity available or granted only to a particular person or group. The operative term is granted : While privilege can be shared, it can only be shared by someone who already has it. Privilege cannot be willed into existence by those who do not have it. That said, everyone comes with some level of built-in privilege.

Contrary to popular notion, ‘privileged’ doesn’t necessarily mean being born with a silver spoon in the mouth. If we go by the HBR optic, it simply implies that certain parts of one’s demographic make-up have created advantages that others do not possess. To elucidate the point: Marginalized and underserved communities may be protected and empowered with special privileges that regular citizens don’t possess. 

For all practical purposes, consider privileges as special rights, advantages and immunities bestowed upon certain individuals - usually on the basis of role, status, hierarchy position, membership in certain circles, affiliation, age, social leanings, wealth or other attributes. 

In a workplace context, privileges can be likened to perks - they are ‘additional’ or ‘extra’ non-cash compensation. Both perks and privileges serve to massage the ego, motivate alignment to the organizational purpose and retain above average talent. 

Compared to perks though, privileges tend to be higher order considerations and experiences. Also unlike perks, which are restricted to business and workplace scenarios, privileges can have a larger connotation and context: Legal, systemic and societal.

EXPERIENCES.

Experiences are non-monetary, non-tangible rewards that deliver enriching moments and delightful memories. Great experiences are hands-on, personalized, aspirational, meaningful and emotionally fulfilling. Entertainment, wellness, community bonding, professional advancement, personality development, passions and hobbies are some spaces and genres that lend themselves to great experience packages. 

From VIP tickets to a musical to an all-expenses-paid exotic holiday to an opportunity to learn pottery making from tribals to a meditative session with zen masters to feeding lions in a sanctuary to adopting a village to a rocketship journey to space – experiences are limited only by the imagination and can be set in a variety of contexts to build powerful resonance with the recipient. 

Experiences can also be bespoke workplace tools, features and environments that are specially created to enthuse individuals and spur productivity. 

Experiences serve to reward stakeholders, employees or high value customers who have displayed exceptional performance or attachment with the company.

LOYALTY. 

The Cambridge dictionary defines loyalty as the quality of being loyal to a particular company or brand. Collins defines loyalty as the quality of staying firm in one’s friendship or support for someone or something. 

As social animals, humans naturally feel attached to the institutions and communities we belong to. Over time, the bond grows stronger, the cement of chemistry gradually hardening into a state of loyalty. 

For organizations that thrive on repeat business, loyalty is a central success metric. After all, acquiring new customers costs 5 to 10 times more than selling to a current customer. The compass points in a similar direction within the organization, too. According to the Harvard Business Review, happy workers generate 31% more work and are 3X more creative than their ‘less happy’ counterparts.

Be it customers or employees, the quest to transform the occasional spark into a sticky and sustainable long term relationship has evolved over time, and the best loyalty programs of today are highly sophisticated, tech driven and deeply personalized interventions. 

Loyalty benefits both the business and its customers and employees via repeat engagement and consistent delight. At its core, loyalty is a natural and organic outcome of a great product-market fit or an outstanding workplace-talent fit. That said, the emotion can be reinforced and amplified with the right incentives and regular rewards. 

For members – be it customer or employee - loyalty programs offer broad level advantages such as personalized experiences, tiered access and VIP memberships. By contrast, incentives and rewards programs tend to deliver gratification that is more immediate and tangible.

ENGAGEMENT. 

The Cambridge dictionary defines engagement as being involved with something, or the process of encouraging people to be interested in the work of an organization. Gallup defines employee engagement as the involvement and enthusiasm of employees in their work and workplace. Wikipedia describes workplace engagement as a fundamental concept in the effort to understand and describe, both qualitatively and quantitatively, the nature of the relationship between an organization and its employees. 

Simon Sinek captures it nicely when he says, “When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.” Highly engaged teams outperform the rest in outcomes critical to business success. A Gallup report suggests they deliver 23% higher profitability. 

Happy employees make happy customers, an adage that underscores the immense importance of employee engagement in business. How does one ensure it, though? Well, employee engagement is a function of employee experience. According to HBR, a new study comprising thousands of employees and executives globally across multiple industries pinpoints the five most important factors in creating a better employee experience: Mutual trust, C-suite accountability, alignment of employee values and company vision, recognizing success, and seamless technology.

Workplace tactics that can drive some the above are acceptance and inclusivity, feedback and communication, enablement and empowerment, opportunities to grow and excel, and regular recognition and rewards. 

The terms experience and engagement are sometimes erroneously used interchangeably. They are closely related, but not the same. Employee experience is what an organization provides to its employees with the aim of creating a positive and personalized environment that amplifies both morale and productivity. Employee engagement, on the other hand, is how the employees respond to it. If experience is the input, engagement is the outcome. An organization has control over the experience, not the engagement. 

PROMOS.

A promo is a broad term that spans a range of marketing, public relations and sales tactics such as special events, social media contests, advertising campaigns and loyalty programs. Promos are meant to amplify buzz, and thereby increase awareness, engagement and sales. While some promos aim to deliver a quick shot of ROI, well planned promos – ones that carry both meaning and worth - can deliver value throughout the year and significantly amplify brand resonance over the long term. Promos are aimed at both present and future customers. They can be both monetary and non-monetary in nature. Examples of promos are free samples, discounts, coupons, loyalty programs, flash sales, limited-time deals, contests and sweepstakes and seasonal / special sale.  

OFFERS.

An offer is a sub-set of a promo. It is a proposal or proposition made by a company to a prospect, outlining the terms of a potential sale. From product features to price points to terms of agreement, an offer can be developed by strategically modifying various brand attributes. While promos have a broader umbrella coverage, offers are more transactionally focussed incentives aimed at driving an immediate response such as a sale, a trail and so on. Examples of offers are BOGO (Buy One Get One), free shipping, money back guarantee, free gifts and others.

DISCOUNTS.

Discounting is a specific kind of promotion or offer. It is applied directly to the selling price, bringing the latter below the standard retail value for a limited period of time. The idea is to trigger the perception of a good bargain and a smart purchase, and drive a spike in sales and revenue in the short term.

DEALS.

Like a discount, a deal is a subset of an offer (which in turn is a subset of a promo) that is typically designed to drive sales and revenue over the short term. A deal can be a bundled package, a negotiated agreement or a limited period value that involves a price reduction. The big difference between a deal and a discount is that while a discount is a straightforward price slash, deals are conditional offers that carry specific Ifs-and-Buts. For example : A flat $50 off on a $500 purchase is a deal that carries the condition of a minimum purchase volume. And a ‘5% discount for purchases before midnight’ is a FOMO inducing limited-time deal that carries the binding of a deadline.

COUPONS.

Coupons allow customers to enjoy a  special discount or a special price which can be a fixed amount or a variable percentage. Coupons can also be redeemed against non-cash benefits and gifts. Coupons can be both physical and digital in nature, and used at both physical outlets and online stores. Coupons tend to be widely distributed and accessible – via flyers, magazines, newspapers and at-venue QR codes. While coupons may have an expiry date, it is common for them to stay valid over long periods to cover multiple purchases till the permissible credit maxes out. No pre-payment is necessary, by the recipient, in order to enjoy a discount via a coupon.

VOUCHERS AND GIFT CARDS.

Vouchers and gift cards are prepaid, often personalized, stored-value instruments that can only be redeemed once, on specific products and services, and by a specific individual. There may be some flexibilities from case to case. Vouchers can be redeemed against a product, a service, a free sample or a discount. Since they cannot be used repeatedly, vouchers are sometimes considered more exclusive than coupons. Unlike coupons, vouchers need to be pre-paid for (by the business or the giver) for the recipient to enjoy the value.  

PROMO CODES.

Promo codes are a popular tactic in e-commerce. One needs to type in an alphanumeric code during checkout to access a discount or benefit. Promo codes can be used on specific products and categories, or the entire order. Unlike coupons which can be both physical and digital, promo codes are only used in an online environment.   

TIPS.

Tips accrue only to employers, not customers. In fact, customers are the ones who pay it directly to the employee or worker. In that sense, it is a unique form of compensation where the value comes from the patron and not the company. Tips can form a significant part of an employee or worker’s income in some industries such as tourism and hospitality. Tips may be taxable in some countries.

GIFTS.

In the universe of give and take, gifts may come off as a bit of an anomaly. After all, on the face of it, they are asymmetric, one sided gestures that are voluntarily initiated by only one side of the equation. 

Leading sources - including the Oxford and the Cambridge dictionaries - define a gift as something that is given to somebody - typically as a present and often on a special occasion - to say thank you. The give and take involved in gifting, however, can transcend a mere exchange of materials, and represent much more.

Gifts are symbols with attached meanings. They trace their roots to a period when humans interacted via gestures, tokens and imageries. 

There are gifts that have become legends over time. The mythical gifts of the three kings to honor the birth of Jesus Christ. The timeless Taj Mahal - one of the 7 wonders of the world - a compliment to his wife Mumtaz Maha by Mughal Emperor Shan Jahan. The iconic Statue of Liberty - a gift from France to the United States commemorating the alliance between the two nations. And yes, even the Trojan Horse that stays in collective consciousness as an enormous (pun intended) saga of treachery and deceit.  

Depending on the context, gifts can go by various names such as grants, aids, handouts, donations and charity. 

Gifting have always played an important role in the fabric of society - serving to generate subtle cues, clarifying relationship equations frictionlessly, making silent statements. Chameleon like, the same gift can take on a million hues, tones and undertones - depending on the intent and the occasion in which it is used. Gifts are particularly effectively in articulating complex emotions that are hard to capture in words - such as gratitude, appreciation, interest, love, care, respect, acknowledgement, apology, remorse, authority and power.  

While gifts may appear to be a one sided exercise, the principle of reciprocity may still apply. The act of gifting either creates a new ‘debt balance’ - a concept attributed to sociologist Dimitri Mortelmans - or closes an earlier one. 

To be effective, both gifting (and the reciprocal act of the ‘return gift’) must be mindful of the occasion and respectful of feelings, or the gesture may both fall short and / or backfire.

In an ideal scenario, there is no expectation of the gift from the receiver’s side, and no expectation of a ‘return benefit’ from the giver’s side. Is it all altruistic, then? While many gifts are, not all may be. Gifts may sometimes be given simply to fulfil social norms and obligations, like a birthday or housewarming present. They may even be born of shady motives: To impress people, enhance one’s reputation or manipulate feelings. 

Gifts are known to release a hormone called oxytocin, often dubbed the “love hormone”, that fosters a sense of trust, tranquillity and connection in both the giver and the recipient. The act of gifting creates lasting memories, strengthens relationships and can even inspire future acts of generosity, driving a virtuous loop for businesses and their employees and customers.

SUBSIDY.

A subsidy is a type of compensation with a heavy philanthropic flavor to it. Subsidies – be it in the form of direct cash payments, tax cuts or reduced prices on goods and services – are meant as a financial support or assistance to individuals, businesses, or industries. Food subsidy, healthcare subsidy, education subsidy, wage subsidy, tax subsidy and infrastructure subsidy are some examples in the genre. The big idea behind a subsidy is to alleviate burden, correct market flaws and stimulate growth.

STIPENDS AND SCHOLARSHIPS.

A stipend is usually a fixed sum of money that’s periodically paid to an individual for activities like training programs, internships and fellowships. A stipend is a financial assistance to cover expenses. A scholarship is a financial aid awarded to support the education of a student. Stipends and scholarships are typically not found in regular employment scenarios, and are distinct from wages and salary.  

NOW THAT YOU KNOW WHO THEY ARE AND WHAT THEY ARE CAPABLE, IT’S TIME TO USE THE VARIOUS AVATARS OF MOTIVATION MORE WISELY AND SMARTLY. 

Why not use XOXODAY to unlock their super-power?

No matter what your mission, xoxoday  has the perfect suite of motivational instruments to turbocharge your customers, employees and channels. Explore the world's largest global rewards marketplace and leverage our AI-enabled rewards automation platform to deliver targeted and personalized experiences. Inspire, empower and build virtuous loop to  take sales and revenue outcomes to the next level – one rewarding moment at a time.