Incentives vs Appreciation – Dilemma of Managers


Incentives vs Appreciation has always been confusing words for a first-time manager.There is a huge difference between the two words. Yet in corporate both are used so interchangeably and that is a huge problem. Managers and leaders don’t realize that using these two powerful words in contexts can make or break a team’s morale.

First, let’s understand the literal meaning of these words in the dictionary –

  • Incentive

a thing that motivates or encourages someone to do something.

“give employees an incentive to improve their performance”

  • appreciation

recognition and enjoyment of the good qualities of someone or something.

“I smiled in appreciation”

Now let’s look at the basic difference between Incentives vs Appreciation

1 It is not discretionary It is discretionary
2 Have a time-period, are measurable Not measurable all the time
3 It is generally tangible It is generally non-tangible
4 It is transactional It is relational
5 It is conditional It is non-conditional
6 It is expected It is surprise
7 It is outcome driven It is based on behavior


Now let’s look at this in practical scenarios –

  • A person achieves his/ her metric on the target. Hence this is an achievement which demanded incentive and the person know that If I do X I will get a Y. It follows all the properties of the incentive mentioned above.
  • A person goes out of the way to help the customer and solve all his/ her issues, it is a situation which demands recognition. This was not something that was planned or could be measured. This came as a surprise and was non-conditional. Hence it follows all the properties of appreciation.
  • A simple thank you in the morning for coming on time is a recognition for the person’s value system. Appreciation generally comes when the person’s value system matches the value system of the company.
  • A simple mail to the team about what happened yesterday and who did well is appreciation, however, when a value has driven tangible thing given as per planned achievement is an incentive.


Hence it becomes very critical for the managers to demarcate between the two and make sure the team understands this. Both are important but the way and the situation in which they are used can create a lot of difference.

Appreciations can have more frequency but not over the line which reduces the effect of this appreciation. On the other hand, incentives are one’s or twice a year based on your performance on the paper.

This creates employee engagement which is one of the most important things according to me which defines a company’s success.

One more important thing to note here is that you cannot motivate everyone to give their 100% and hence you should follow the 80-20 rule where you make sure that you motivate at least your 20% employees using incentives and appreciation who do 80% of your work. Not the next question is what motivates them? The answer to this lies in your company’s vision and first principles and why in the first place the person joined the company.

We must understand this that everyone works for money as an outcome. But what we don’t understand is that the process of getting there is also important and this is what makes the most difference.


I have tried a couple of things with my team some worked some didn’t but what I realize that the incentives and appreciation also depend on what is the respect level of that person in people’s mind. Thus make sure that the team is always appreciated for what it has achieved but incentives can be purely goal driven.

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