Employee Recognition Programs
Managing the delicate balance in delicate times
Everything about employment is tough these days. Choosing
the right person. The unpredictability of economic and
competitive conditions and how they might prompt reductions
in staff. Not the least of employment problems is holding on
to really productive employees who, frankly, are just as
employable elsewhere. The term human resources has never
been more profound, and its’ significance in a global
economy will only grow.
What makes the matter more delicate is the awkwardness of
focusing on tenure in a time of frequent lay-offs. Employees
of a company that has suffered a lay-off may dismiss a
program that cites the few employees who lasted decades with
the firm. Tenure and performance are not the same thing.
Nonetheless, employees make career choices based on their
perceptions and intuitions. A 2003 Gallup poll reported that
61% of employee surveyed reported that they hadn't received
any meaningful positive attention in the past year. Another
study indicated that 53% of employee respondents left an
employer due to lack of incentives or lack of recognition
One Harvard study outlines the service profit chain, their
term for the connection between employee satisfaction and
customer service, and customer service’s relationship to
profits. For example, Taco Bell found that 20% of the stores
with the lowest turnover rates enjoy double the sales and
55% higher profits than the 20% of stores with the highest
employee turnover rates.
Failing to recognize employee performance – the dollars
and sense of it
Most organizations greatly under-estimate the costs of
employee turnover. Consultants Bliss & Associates have
extensively studied these costs, both the obvious ones and
less conspicuous ones, in their Turnover Cost Projection
Model. The Bliss model includes four categories of turnover
cost: 1) costs due to the person’s leaving, 2) hiring costs,
3) training costs, and 4) lost productivity costs.
A human resources website called HR.com estimates it costs
two to three times more to replace a worker than to retain
the employee. Bliss estimates the cost of replacing a
departing employee begins at 150% of his or her salary. Do
the math: consider the added value of reducing turnover by,
say, 25% and putting that savings into revenue producers.
Employee turnover can no longer be viewed as an
uncontrollable reality of running a business, flippantly
dismissed with statements such as “hey, we can’t do anything
about … employees leave and that’s that.” Some organizations
have low turnover even in tough economic conditions. Why?
Perhaps such firms have analyzed their turnover costs and
seen the impact on the bottom line.
How good employee recognition programs work – can your
company do it?
- Employees work best if given concrete goals and
objectives that they and their supervisors can both measure
and manage. Clear, understandable criteria for recognition
- Understand each employee’s ‘hot buttons.’ What motivates
19-year-old part-timers struggling to pay tuition isn’t what
a full-time career track store manager or line manager views
- Successful employee recognition programs allow for multiple
- Successful recognition awards are often individual surprises
rather than multiple awards saved for an announced event.
Instead of employees focusing on winning an award, they are
focused on just doing well at their jobs.
- All employees at all levels should be recognized for good
work, including supervisors and managers.
- Successful programs don’t have to be elaborate and
complicated to work. Once criteria are set and recognition
awards match employee values, administration can and should
- Versatile recognition programs include tangible and
intangible awards for all types of employee successes, from
concrete and visible contributions to subtle influences on
the company’s successes.
- To be effective, acts of employee recognition should come
from the managers who hire, fire, appraise, coach, and
correct employees on a daily basis. Recognition programs
can’t be left to top executives at boring monthly meetings.
- Top executives who offer simple, verbal expressions of
gratitude are recognizing employee performance with as much
impact as physical rewards offer.
How employee recognition programs go wrong – are these
The Wall Street Journal wrote about employees’
recognition experiences. "Employee-reward programs can be
so unrewarding. The plaques, tchotchkes with logos, goofy
contests and ham-handed presentations tend to backfire. It's
not that they're all bad, but too often they seem like empty
gestures supported by upper management, administered by a
less-than-enthused middle management, and received by
under whelmed staffers. All when an honest thanks would have
Employee of the Month programs that fail: EOM is a
popular form of recognition. Effectiveness, however, is
another issue. EOM programs typically violate every
principle of recognition and positive reinforcement. They
don’t precisely identify what must be done to get the award.
Consequently, choosing the winner becomes a guessing game
management grudging plays at the end of staff meetings.
Equally important, EOM programs do not recognize model
performance immediately, but arbitrarily await the first of
the month when the significance of the performance has faded
from memories. But the biggest failing of EOM is that only
one employee wins. Ask yourself this: Does your firm have
only one model employee each month and the rest are losers?
Any employee recognition system that recognizes only one
person’s success and limits everyone else’s success is a bad
Cash doesn’t work: Employee recognition seeks to
spotlight good performance so that other employees get the
hint and model it. Recognition must have showcase value;
cash becomes invisible very fast.
Tenure versus performance: Focusing on tenure –
service awards -- has drawbacks in uncertain times. Awarding
good work and high productivity, however, is a program for
everyone, including new hires.
Confusing recognition with compensation: Because
salary increases are invisible and private, they have little
showcase value. Compensation is a given, not a trophy.
Employee recognition, however, must run on different
assumptions and goals. Recognition is a thank you. Research
shows that employees value the admiration of colleagues and
superiors and seek recognition for good work. That’s how
recognition programs create role models throughout the firm.
Programs that publicly spotlight employee accomplishments
have trophy value.
Confusing recognition with incentives: Philip Holmes
asserts that recognition and incentives are not
interchangeable concepts. Recognition programs seek to
spotlight employees who perform well. Incentive programs
seek to induce people to achieve a specific objective, such
as increase sales.
Individuals differ: Some employees crave public
recognition; others shun it. Employee recognition is
complex, requiring knowledge of the psychology of motivation
as well as each employee’s sensitivities. A recognition
program that employees perceive as an expectation – a
given -- rather than an aspiration will collapse into
its own naïve psychology.
Myopic perceptions: What management views as
reinforcing is not how everyone else views it. Not everyone
is a sports nut. Not everyone drinks wine. Most people
already have watches, clocks, folders, pens, hats…and
t-shirts hanging out of drawers. Gather many viewpoints for
Employee recognition program successes – could these
ideas work for you?
Successful employee recognition programs use unique
incentives to change workplace culture:
- Accumulated points used for merchandise redemption in an
- Gift certificates, dinner certificates, movie and athletic
- Performance cards that, once filled, can be redeemed for
- Supervisors issue “on the spot” recognition chits for small
acts of customer services that employees can redeem for
One expert, John Domenick, developed seven steps for setting
up an effective recognition system, starting with the
identification of key business results that would be
improved by a more motivated and content workforce. He
asserts that a firm’s recognition policies and procedures
should be as organized and complete as the firm’s sales
plan, benefits package…and disciplinary system.
Some case histories – could you join this list?
Restaurant chain’s repeat business rises 53%: This
chain’s decline in repeat customer sales needed immediate
attention. The solution: A program that engaged
employees more actively in customer service. Managers used
‘customer care currency’ to reward employees on the spot for
customer care behaviors. Repeat sales improved 43% during
just the first three months of this program.
Mortgage firm cuts processing time by four days:
Interest rate changes greatly affect loan center operations.
Rushes stress out employees. The solution: Train
employees in all aspects of the loan process, rather than
just one facet, to enhance teamwork. A recognition program
started rewarding both individuals and teams for meeting
application-closing objectives. Overall loan processing
times improved by more than four days. The firm gained
substantial market share in a very competitive market.
Big banks lose career employees to small community bank:
Larger banks can offer substantial benefit packages to
employees, making it difficult for one community bank to
attract and retain qualified employees. The solution:
An employee recognition program that rewards employees in
all departments and job functions for both years of service
and for achievement of monthly objectives. The community
bank gained from better-educated employees who also became
interested in careers at the bank.
Small retailer gets his life back: A local retail
owner thought he would never have a life outside his
business. He could not afford the wages and benefits
necessary to hire employees who would last beyond three
months. The solution: Use non-cash forms of employee
recognition to recruit and retain employees. Employees were
rewarded for referrals of qualified employees who stayed
more than three months. Daily recognition rewards were
issued for being on time, for opening the store in the
owner’s absence, and for outstanding customer service.
Employee retention increased during the first six months.
The owner’s store became identified locally as ‘the best
place to work.’
How to get started
Employee recognition programs need delicate construction.
Poorly designed programs appear half-hearted or silly to
employees. The psychology of self-esteem and motivation is
complex. A rich body of corporate ‘best practices’ is
available. Starting without such knowledge will almost
surely lead to pitfalls that could have been avoided.
But starting from scratch isn’t necessary. An employee
recognition program professional can show you how to set up
a program nearly free of administrative hassles and record
For more information contact:
Bob Dawson, CITE
The Business Group, Inc.