There is a scene from The Incredibles (back in 2004), when the Incredibles were attempting to blend in as a regular family with no super-hero powers. Dash was told by his parents to run at an average speed in a race and not to worry because he would get a participation trophy. Dash insightfully replied with "When everyone is special, no one is!" Fast forward 20 some years, and we are still rewarding mediocre staff and handing out trophies and awards at sports events even when no one is winning or excelling at what they do.
When leaders hand out rewards to everyone, they negate the accomplishments of those who put in the extra effort, who went above and beyond, or delivered excellence. Those who do work hard and put in the extra efforts sets them apart from those who work at the bare-minimum and only put in minimal effort. Those who put in the extra work and effort should rewarded as they provide encouragement for growth and development in others. If there is no incentive for others to excel and everyone is rewarded regardless of the quality of their work or effort they exert, all we are left with are mediocre staff who produce mediocre work and are never motivated to try harder, do better and essentially lower the bar.
As leaders, we must encourage excellence in others and one way to do that is to reward those who demonstrate extraordinary efforts. Not everyone is meant to be extraordinary, but we shouldn't be rewarding mediocrity at the expense of those who demonstrate excellence.