Running a business is easier if both your managers and your employees feel that they're appreciated. Mutual reward theory states that a manager can't become a good leader if her underlings don't have incentives to be good followers. If both leaders and followers reward each other for good performance, it will encourage them to work together for the benefit of the company and themselves.
If you want to inspire real leaders among your staff, the University of Idaho states, you'll have to inspire employees to follow them; ultimately, regardless of what the company tells them, it's the employees who decide which managers are real leaders. Managers can browbeat and threaten employees to comply with their dictates, but a mutual system of rewards produces better results. If both sides gain rewards for working together -- managers leading, employees following -- they'll become committed to forging a winning team.
Mutual reward theory isn't about cash, Pearson Higher Education states in "The Supervisor-Employee Relationship"; you'll get better results when you focus on intangible but more satisfying rewards. A manager can reward employees, for example, by giving them a say in decisions and trusting them to work without close supervision. Employees can reward managers by being productive, dependable and taking direction when it's needed. This approach also encourages greater communication, which will lead to further improved teamwork.
To make a mutual reward system work, the University of Idaho states, managers have to tailor the rewards to both the needs of the company and the needs of the employees under them: One employee may want public recognition, for example, while another wants greater independence. Good leaders know the mix changes over time: When problems crop up, they may have to adjust the rewards to make sure everyone focuses on overcoming the obstacles.
Mutual reward theory doesn't operate in a vacuum, the University of Idaho states in "Adopt the Leadership Formula," a downloadable article. Successful businesses will employ rewards as one of five key elements in good leadership. The other elements are the ability to see the big picture and achieve big goals, effective decision making, effective communicating and the power to influence people. These elements, the university states, can be combined with any management style and in any corporate environment.