Should Organizations Reward Employee Performance or Behavior?

Performance vs behavior in rewards — learn how to strike the right balance between recognizing business outcomes and the values-driven actions that drive long-term culture.

Executive Summary

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1. Organizations should strike a balance between rewarding employee performance (measured by business metrics such as sales, customer satisfaction, and productivity) and behavior (including collaboration, initiative, and positivity) to drive long-term success.

2. Traditional reward systems focus on high performance, but there’s a growing recognition of the importance of rewarding desirable behavior that aligns with company values and culture.

3. A well-rounded reward system considers both the achievement of business goals (the “end”) and the positive behaviors contributing to a healthy workplace culture (the “means to the end”).

4. By integrating performance and behavior in reward systems, organizations can motivate employees holistically, enhancing productivity and workplace culture.

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A well-designed employee rewards system can enhance productivity, growth, and profitability by motivating the workforce to go that extra mile. However, when developing such programs, organizations often face the dilemma of balancing rewards for employee performance or behavior.

We take a deeper look into this subject to help organizations address this concern:

Impact of Recognizing Performance versus Recognizing Behaviors

Focus Areas	Recognize Performance	Recognize Behavior	Potential Impact
Primary Objective	Rewards achievement of business goals, KPIs, and measurable outcomes	Rewards the demonstration of desired values, attitudes, and workplace behaviors	Creates balanced performance and culture-driven growth
Examples	Sales targets achieved, project delivery, productivity milestones, and revenue growth	Collaboration, innovation, teamwork, customer-centricity, mentorship, and adaptability	Encourages both results and positive workplace culture
Short-term Impact	Drives immediate productivity and goal achievement	Reinforces positive daily workplace interactions and behaviors	Improves execution efficiency and employee experience
Long-term Cultural Impact	Can create highly competitive environments if overemphasized	Builds a sustainable, collaborative, and values-driven culture	Strengthens organizational culture and retention
Best Use Cases	Sales teams, operational targets, project completion, measurable performance outcomes	Culture-building, teamwork, innovation, leadership, customer service	Enables holistic employee development
Employee Motivation Style	Motivates through achievement, rewards, and performance incentives	Motivates through appreciation, belongingness, and emotional connection	Improves engagement across different employee personalities
Impact on Collaboration	May unintentionally encourage siloed or individual-focused work if not balanced	Encourages teamwork, knowledge-sharing, and cross-functional collaboration	Improves organizational collaboration and agility
Impact on Innovation	Rewards successful business outcomes and execution excellence	Encourages experimentation, creativity, and idea-sharing behaviors	Strengthens innovation culture and adaptability
Manager Recognition Approach	Focuses on measurable deliverables and output quality	Focuses on how employees contribute, collaborate, and support others	Creates more balanced leadership and people management
Peer Recognition Alignment	Less naturally suited for peer recognition unless outcomes are highly visible	Highly effective for peer-to-peer appreciation and social recognition	Strengthens workplace relationships and team morale
Alignment with Core Values	Indirectly supports culture through the achievement of goals	Directly reinforces company values and desired behaviors	Improves culture consistency and employee alignment
Recognition Frequency	Often periodic or milestone-based	Can be frequent and real-time through daily appreciation	Sustains engagement and continuous reinforcement
Risk if Overused Alone	Can create unhealthy competition, burnout, or transactional culture	Can reduce focus on measurable business outcomes if poorly balanced	Highlights the need for a balanced recognition strategy
Impact on Employee Retention	Retains high performers motivated by achievement and rewards	Improves emotional engagement and belongingness across the workforce	Strengthens long-term employee loyalty
Suitability for Hybrid & Remote Teams	Easier to measure through output metrics and KPIs	Important for maintaining collaboration and connection in distributed teams	Improves engagement in hybrid work environments
Impact on Leadership Development	Encourages accountability and execution-focused leadership	Encourages empathy, mentorship, and collaborative leadership	Develops stronger people-centric leaders
Recognition Platforms & Digital Enablement	Often integrated with incentives, bonuses, and performance systems	Frequently enabled through social recognition platforms and collaboration tools	Improves visibility and participation in recognition programs
Best Practice for Organizations	Recognize both business outcomes and measurable achievements consistently	Simultaneously appreciate collaboration, innovation, and cultural behaviors	Creates balanced, high-performing, and culture-driven organizations
Ideal Recognition Mix	Use for measurable impact, business performance, and strategic goals	Use for reinforcing culture, teamwork, and long-term behaviors	Delivers stronger engagement, productivity, and organizational resilience
Overall Business Impact	Improves productivity, accountability, and business performance	Strengthens culture, collaboration, engagement, and employee experience	Creates sustainable organizational growth and stronger employer branding

Why is it Important to Reward Employee Performance and Behaviour?

Both employees’ performance and behavior are critical to organizational success. 

Employee performance is usually measurable in terms of the business metrics or output against predefined goals. 

It directly impacts an organization’s performance.

Since the ‘proof of the pudding is in its eating.’ It is almost a no-brainer that traditional employee reward systems have always rewarded high performers. 

As it is, organizations have regarded these top performers as the biggest contributors to business growth and profitability.

However, of late, organizations have also come to acknowledge the importance of good employee behavior. 

They have understood that ‘the means to the end’ is as essential.

Employee behavior can impact workplace culture and goodwill significantly in the long run.

Hence, many organizations have made desirable behavior an integral part of their reward systems.

Hence, by appreciating specific behavioral traits, organizations can motivate employees to align their behavior with the company’s core values and culture.

What Aspects of Employee Performance are Important to an Organization?

The performance of employees ultimately determines the success of the organization. 

An organization with more high-performing employees is likely to grow faster, be more profitable, and capture a higher market share.

The performance of individual employees, as well as teams, is measured against goals, defined in terms of business metrics or outcomes.

The following is a list of such key metrics that define the goals and performance of the employees:

1. Sales/Revenue

2. Customer Satisfaction/ Experience

3. Output/ Quantity Delivered

4. Quality of Deliverables

5. Timeliness of Delivery/ Productivity

6. Innovation/ Process Improvement

What Aspects of Behavior are Important to an Organization?

Unlike employee performance, which KPIs and goals can clearly define, desirable behaviors are more challenging to define as KPIs and goals.

However, organizations today have understood the strong linkage between employee behavior, work culture, and long-term business success.

Employee behavior can significantly impact an organization’s employer brand value and its ability to attract, hire, and retain top talent.

Here are critical aspects of employee behavior that strongly link to the success of any organization:

1. Collaboration: Working smoothly and coordinating with co-workers, peers, and supervisors.

2. Initiative: The willingness to take on new challenges to bring positive business or workplace changes.

3. Positivity: Ability to always stay upbeat and optimistic, even during a crisis.

4. Timeliness: Ability to stay focused and complete tasks on time, every single time, despite challenges.

5. Consistency: Strong will and persistence to deliver despite challenging situations.

Which is More Important to Reward: Employee Performance or Employee Behavior?

Organizations have traditionally recognized and rewarded employees for their outstanding performance. 

However, this mindset has changed over the years as they have come to realize the importance of employee behavior, company values, and work culture for long-term success. 

Hence, many organizations have incorporated employee behavior as a key element in the employee reward systems in recent times.

Organizations are now adopting a more balanced approach to employee rewards, taking into account both performance and behavior.

The following are a few pointers for organizations in this regard:

1. Reward systems should give fair weightage to employee performance and behavioral traits.

2. Organizations should ensure these behavioral traits align with company values and desired work culture.

3. Employee performance should continue to be measurable against key business metrics.

4. The employee rewards system becomes more balanced, rewarding both ‘ends’ and ‘means to the end.

The HiFives Perspective

Organizations faced with the dilemma of whether to reward employee performance or behavior need to take a more balanced approach of rewarding the contributions of the employees towards achieving business goals as well as towards creating a more positive work environment.

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