Creating Categories for Employee Reward and Recognition

Your employees can be your greatest asset or biggest liability. They have the power to help propel your company to new levels of performance and profitability.

They can also tarnish your sterling reputation and strain the bottom line if ignored.

Rewarding and recognizing employees is an easy way to encourage high levels of performance.

Traditional merit-based pay plans, such as raises or bonuses, are not truly effective employee motivators, says Kevin Herring, founder of Ascent Management Consulting and an expert in workplace performance turnarounds.

Herring encourages business owners to focus on creating an environment that engages employees and nurtures a sense of ownership amid workers.

Merit pay, he notes, is often more about the economy than performance.

In a down economy, profits will be down and workers less likely to attain pre-set goals, no matter their level of performance. If employees already know they cannot attain sales or production levels due to factors beyond their control, such as the economy, loss of a large client, etc., they have lost their motivator.

Allocating a small percentage of a project cost to recognize and reward extraordinary employee performance can yield far better results than across-the-board raises or bonuses.

When creating categories for employee reward and recognition, business owners should be sure to:

  • Ensure all employees who are eligible, not just those performing certain tasks.
  • Truly reward extraordinary performance, not just a rotation of “Employee of the Month” honorees with everyone eventually getting their turn.
  • Be fair. Now is not the time to play favorites.

Herring advocates letting work teams decide who will receive performance-based rewards.

“Studies show that recognition from peers is far more powerful than from the boss,” he says. “And the work team knows better than anyone who put forth the extra effort.

”An additional benefit is that even those who are not awarded feel that they are valued and have a say in the decision-making process, key characteristics of engaged employees.

Peer recognition rewards can be established for a time period, i.e. each quarter of year, or a specific project. Managers should also be sure to recognize an employee in each work unit.

“Set goals for the unit, and when the team reaches objectives, they share the rewards,” says Herring.

Managers can also give “spot” awards for incidents of high performance. A simple restaurant gift card and public recognition for “going the extra mile” can go a long way in boosting employee performance.

The Society for Human Resource Management (SHRM) identifies three main types of effective rewards:

1.  Monetary: performance and incentive bonuses, service awards, spot bonuses, retirement awards, etc.

2.  Noncash: Expression of appreciation for efforts, such as thank-you letters and e-mail messages, employee appreciation events.

3.  Virtual: Almost instantaneous recognition and gifts presented to an eligible employee via the Internet.The goal, says Herring, is to create a situation where workers feel they are appreciated and “have a stake” in the business.