Performance pays off: Building a total rewards strategy aligned with business growth

June 10, 2026

Drew Maginn

In the past, an employee’s definition of “compensation” might have been limited to their salary and benefits. However, as times have changed, so to have expectations of what constitutes compensation. And organizations that incorporate a total rewards strategy have far more options to incentivize their workforce. By offering performance-linked rewards within a comprehensive compensation and benefits strategy, organizations can find ways to motivate their employees while also growing their business.

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What is a total rewards strategy?

Organizations that adopt a total rewards strategy embrace a broader definition of compensation that considers more than just base salary and standard benefits. Depending on the motivators of their employees, these organizations offer additional rewards such as:

Variable pay (e.g., production bonuses, commissions, team/group incentive plans);
Enhanced benefits (e.g., flexible programs, retirement plans, time off);
Recognition (e.g., awards, advancement opportunities);
Career development (e.g., learning opportunities, mentorship, stretch assignments); and
Flexibility (e.g., remote work, flexible hours, greater work-life balance).

These rewards are actively communicated and serve as incentives to high-performing employees who contribute to key organizational goals.

” Organizations that adopt a total rewards strategy embrace a broader definition of compensation that considers more than just base salary and standard benefits ”

Linking action to rewards: Steps to build your total compensation framework

While every organization may take a slightly different approach to developing their total compensation framework, taking these key steps will ensure that your process is evidence-based and thorough.

Review your business strategy and objectives: While establishing this type of framework is motivating for employees, rewards cannot be assigned arbitrarily. The purpose of a total rewards strategy is to incentivize employees to advance the work of your business. This means reviewing your strategy and identifying which business goals are so critical to success that you’re willing to offer incentives to employees who help you reach them.
Identify your reward options and limitations: Before you engage with employees, you need to identify what rewards can be offered to incentivize the performance you want to see. Depending on your type of organization, some rewards may not be possible – for example, offering pay bonuses in a charity or small start-up with financial limitations or offering flexible hours/remote work in a service-oriented business. By recognizing your own limitations, you avoid creating expectations that can’t be met or sustained.
Consult with employees: As you engage employees, it’s important to assess their understanding of your strategy and business goals, as well as how they understand their role in helping you achieve them. In addition, ask about what type of rewards they prefer, keeping in mind not to offer any options that won’t be considered.
Tailor your goals, measurement tools and incentives: Once you have assessed employee understanding of your key business goals and their preferred incentives, you can revisit your current compensation system to determine if changes are required. This might involve adjusting how you communicate the business goals, how employee contributions are measured and what incentive(s) will be offered.
Communicate your approach to compensation: If you’ve taken the time to develop a thoughtful approach to compensation, it’s worthwhile to share information about it with your employees to avoid confusion and manage expectations. This might include information about:
- Your overall compensation package (e.g., What are all of the things we offer our employees? What makes our organization different from others? What is our value proposition?)

Your approach to determining base salary and benefits (e.g., How do we ensure our salary and benefits are fair and competitive?)
Your salary and benefits structure (e.g., What are our different salary bands? How can employees progress through them? What benefits do we offer?)

Additional rewards and incentives (e.g., What business goals are important to us? What rewards can employees earn for contributing to them? How do can they earn them and how will it be measured?)

Depending on your organization, you can share as much information as you feel employees can handle and reassure managers that you’re available as a resource if they need help explaining anything to members of their team.

Assess and evaluate: Total rewards frameworks are unique to each organization and need to be assessed over time to determine if they are effective. These metrics could include monitoring overall employee performance, turnover and satisfaction to see if the performance levers you selected are actually making a difference to your bottom line.

What should be considered as you roll out rewards?

While there are countless benefits to offering rewards, this type of motivational tool may accidentally cause friction among employees or between employees and management. A few considerations to keep in mind include the below.

Reward preferences may vary: Depending on your employees and industry, certain rewards may be more appealing than others. While many employees undoubtedly appreciate earning a cash bonus, others might equally appreciate earning extra vacation time, receiving greater flexibility in when and how they work or being given more opportunities to use their untapped skills.

Rewards are not all or nothing: When you engage your employees in the rewards process, you might feel like you’ve failed if you can’t deliver everything they’ve asked for. However, you’d be surprised how much employees appreciate small, thoughtful rewards that recognize their contributions to advancing the work of your organization. Starting small and adding incentives over time also allows you to develop a system that is sustainable and doesn’t need to be pulled back if your organization faces challenges in the future.

Reward systems should be clear, measurable and defendable: Many well-intentioned rewards systems fall short because they were developed with complex or confusing rules or their application is inconsistent. If employees don’t understand how they can earn the rewards, they may become frustrated and not even try. Additionally, if a subjective measure like a performance evaluation allows managers to pick and choose their favourites without needing to back it up, employees may begin to resent others who they feel are being unfairly recognized.

Expectations around compensation continue to grow, and most employees have moved beyond salary and benefits in determining whether they’re satisfied with their job and their employer. By providing employees with opportunities to earn additional rewards for advancing key business goals, you can play a key role in creating a win-win situation for everyone involved. Many employees are no longer simply chasing a paycheque, and organizations that find new and interesting ways to motivate their workforce may be surprised by the increase in engagement, productivity and loyalty that follows.

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