Rewards and Recognition

By Sherry Ryan

Like a child being given a chocolate cupcake and a big hug after cleaning her room, rewards and recognition can be powerful tools for employee motivation and performance improvement. Many types of rewards and recognition have direct costs associated with them, such as cash bonuses and stock awards, and a wide variety of company-paid perks, like car allowances, paid parking, and gift certificates. Other types of rewards and recognition may be less tangible, but still very effective. These "non-monetary" rewards include formal and informal acknowledgement, assignment of more enjoyable job duties, opportunities for training, and an increased role in decision-making. This paper focuses on non-monetary rewards, and as we will see, these types of rewards can be very meaningful to employees and so, very motivating for performance improvement. But first, let's take a quick look at the primary goals of rewards and recognition. Jack Zigon defines rewards as "something than increases the frequency of an employee action" (1998). This definition points to an obvious desired outcome of rewards and recognition: to improve performance. Non-monetary recognition can be very motivating, helping to build feelings of confidence and satisfaction (Keller 1999). Another important goal is increased employee retention. An ASTD report on retention research identified consistent employee recognition as a key factor in retaining top-performing workers. (Jimenez 1999). To achieve desired goals, reward systems should be closely aligned to organizational strategies (Allen and Helms 2002). For example, a company focused on a product differentiation strategy could design their reward practices to foster innovation to provide unique products or services, while a company focused on a cost reduction strategy might focus on rewards for ideas to minimize or eliminate costs and employee stock awards to foster an on-going cost reduction emphasis. Zigon offers a variety of ways to reward desired performance and increase the likelihood of it happening again, and more frequently than it would have, without these types of interventions. His web site lists ideas that give managers a lot of flexibility both to offer rewards at various cost levels and to find rewards that match what individual employees will find valuable. To be really effective, this takes time and effort on managers' parts, to get to know different employees' likes and dislikes. How effective is non-cash recognition? Various anecdotal evidence reports non-monetary recognition as an important factor in retaining excellent employees and for improving performance. A quick search of a news service database points to articles extolling various perks such as an in-house chiropractor, spa gift certificates, days off, fancy parties and the use of personal trainers. The givers of such perks see these rewards as a way to keep high performing employees in a shrinking job market; and certainly companies like Walt Disney World have documented the success of employee recognition programs (Lynch 2003). However I did not find any strong empirical evidence comparing the relative benefits of monetary versus non-monetary rewards. In the absence of such evidence, we can still consider non-monetary rewards as part of comprehensive performance improvement strategy. So what types of non-monetary rewards are the most effective? Bob Nelson, recognition consultant and self-proclaimed "Guru of Thank You" reports research indicating that the type of recognition employees appreciate most is to be recognized by people they work directly for. In fact, 78% of employees indicated that it was very or extremely important to be recognized by their managers when they do good work (Nelson 2004). The number one choice for recognition is sincere praise given in a timely manner with specific examples. Allen and Helms' (2002) research confirmed the importance of regular expressions of appreciation by managers and leaders to encourage behavior of employees to reach strategic goals; and this was true for each of the strategies they examined. Mike Rushby, HR Vice President at Weyerhaeuser Company, sees developmental opportunities, such as assignments to special projects as a powerful form of non-monetary recognition (personal communication, February 17, 2004). Rushby believes that being chosen to work on a task team to accomplish a company initiative is motivating because it helps employees gain new skills and experiences, demonstrates trust in their abilities, and adds variety to an individual's work. Weyerhaeuser uses the Performance Management Process and Individual Development Plans to help identify strong candidates for developmental opportunities. People are motivated to higher levels of job performance by positive recognition from their managers and peers (Keller). Creative use of personalized non-monetary rewards reinforces positive behaviors and improves employee retention and performance. These types of recognition can be inexpensive to give, but priceless to receive.

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Author Note

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