Companies that reward their top performers more than other staff produce significantly higher returns to shareholders than those that don't customise benefits, according to recent research.
The Watson Wyatt Strategic Reward Survey found that those organisations that customise reward schemes to motivate high achievers produced average five-year shareholder returns of 74 per cent.
This compared with an average of 57 per cent for companies with reward programmes that didn't differentiate.
Tony Gilbert, a partner at Watson Wyatt, explained that the findings supported the argument that a well structured reward programme is a source of competitive advantage.
"Motivating your best performers with better rewards really does work," he said. "Many employers instinctively know this, but what our research shows is just how large the effect may be."
But more than just financial incentives, the survey found that some of the most successful rewards for motivating top performing employees were not related to pay. These included tailored jobs, the opportunity for promotion and the acquisition of new skills.
The survey of over 170 European companies found that higher performing companies were the most likely to consider employee rewards as a means to improve performance.
Over three quarters of high performing companies - those in the top third for total shareholder return performance over five years - reported that they see rewards as a way to engage people in improving performance. This compared with 44 per cent of low performing companies.
Motivating those employees most able to make a significant contribution to a company's success also increases company performance and controls costs by reducing turnover of key staff, according to Gilbert.
Although employers are generally finding it easier to retain employees in the current economic climate, 70 per cent of employers admit that they still experience some difficulty in attracting or retaining top performing staff.
The survey also asked 2,000 top performing employees how likely they were to leave their current employer within the next year.
In companies with reward programmes structured to differentiate between top and average performers, 24 per cent said that they were 'moderately likely' to leave. This increased to 35 per cent for firms that did not differentiate.
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