Studies have shown that employee rewards programs can be a good idea (companies with some kind of recognition program have 31 percent lower turnover, according to Bersin & Associates). But, the execution of an employee rewards program can be bad or good.
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Employee of the Month
What's wrong with recognizing a high achiever every month? The problem is that by picking one employee, you're not picking others who may have worked just as hard. Those not picked may feel resentful for being overlooked. Also, typically once an employee gets the honor, they become ineligible to win again for some period. While this might seem to promote fairness, it's not much of a continuing incentive for past winners.
Maybe the gold watch to commemorate a long-term employee upon retirement is appropriate, but a recognition program that gives out pins or plaques for service anniversaries just rewards people for hanging around. The problem isn't so much that there's something wrong with recognizing longevity, as that it doesn't motivate employees to improve performance, which is the whole point of a rewards program. As Forbes contributor Josh Bersin points out, research shows that "tenure-based rewards systems have virtually no impact on organizational performance. Did you stay an extra year at your last job so you could get a 10-year pin? I doubt it."
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Regularly Praising People Just for Doing Their Jobs
People are getting paid to do their jobs. You reward people for exceeding normal expectations of doing a good job. Yet too many managers persist in praising people for doing what they are supposed to be doing. If you're continually rewarding people for routine work, how can you expect them to put in the extra effort that truly deserves special recognition and rewards?
Management's selection of top performers is always going to be suspect, no matter how genuine and objective the selection is. People will always suspect managers of playing favorites or that there are political reasons behind a selection. You can eliminate this by asking peers to choose who they think should be recognized. In fact, letting peer employees recognize top performers is itself recognition of confidence that those in the trenches are the best judges of who is doing an outstanding job.
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Performance-Contingent, Goal-Oriented Recognition
People like to know exactly where they stand. A program that sets realistic goals and clearly articulates the reward for achieving the goal does this. Anyone who meets a stated criterion (e.g., exceeding quarterly sales targets by 15 percent) is rewarded.
Recognition should happen soon after the goal is achieved. This way the recognition reinforces the behavior you're trying to encourage. Since the employee is already feeling good about the accomplishment, timely recognition serves to enhance those feelings and further motivate extra effort.