A great manager rewards people. It is clearly a great motivation tool and can increase performance. I think most people would agree with this.
The issue that managers need to focus on is how to best reward people. Unfortunately, it is hard to do. You cannot create a one-size-fits-all reward strategy, because the individuals on your team want to be treated as individuals.
The one thing that is the same for everyone is that motivation is more effective when it is intrinsic vs extrinsic. In short, people will always drive themselves better than external forces will drive them. Hence, managers who think money is the most effective reward are wrong because that is totally extrinsic (except in unusual cases).
For example, I will always be more motivated to work harder for my wife and daughters than any boss. Because of my love for them, I want to help them all the time regardless of anything. It would be highly unusual (but not impossible) to have that same relationship with a manager.
The manager’s challenge is to figure out how to motivate every individual. Building a strong relationship is the start because. This helps the manager learn likes/dislikes. The great manager goes beyond that though by experimenting and seeing how the individual reacts. Some individuals will be motivated by the thought of a promotion or career advancement, others by time off, others by a thoughtful gift, etc.
Do you create one-size-fits-all rewards? Or do you spend time rewarding people as they want to be rewarded?